TY  - JOUR
AU  - Sachs,Jeffrey
TI  - High Unemployment in Europe:  Diagnosis and Policy Implications
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1830
PY  - 1986
Y2  - February 1986
UR  - http://www.nber.org/papers/w1830
L1  - http://www.nber.org/papers/w1830.pdf
N1  - Author contact info:
Jeffrey D. Sachs
The Earth Institute at Columbia University
314 Low Library
535 West 116th Street, MC 4327
New York, NY  10027
Tel: 212/854-8704
Fax: 212/854-8702
E-Mail: sachs@columbia.edu
AB  - Econometric evidence suggests that the non-accelerating inflation rate of unemployment (the NAIRU) has risen sharply in Europe in the past fifteen years. In the first section of this paper, I review the recent proliferation of supply-side models that say interesting things about why the NAIRU hasincreased so substantially in Europe. In the second section of the paper, I employ a simple example to show how aggregate demand should optimally be managed in response to transitory and permanent supply shocks, especially those shocks that cause a persistent rise in the NAIRU. Also, I discuss some policy implications of the increasingly popular "hysteresis hypothesis, that the NAIRU itself is influenced by the time path of actual unemployment.
ER  -