The Effect of Hysteresis on Fluctuations in Unemployment and Inflation when Inflation Expectations are Adaptive

The Effect of Hysteresis on Fluctuations in Unemployment and Inflation when Inflation Expectations are Adaptive

The recent level of unemployment may affect the natural rate of unemployment. The implications of such an hysteresis effect for macroeconomic fluctuations is analyzed using a stochastic dynamic model. The greater the importance of an hysteresis effect, the more pronounced are fluctuations in unemplo...

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Veröffentlicht in:Pacific economic review (Oxford, England) England), 1999-02, Vol.4 (1), p.59-63
1. Verfasser: Smyth, David J.
Format: Artikel
Sprache:eng
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Zusammenfassung:The recent level of unemployment may affect the natural rate of unemployment. The implications of such an hysteresis effect for macroeconomic fluctuations is analyzed using a stochastic dynamic model. The greater the importance of an hysteresis effect, the more pronounced are fluctuations in unemployment and inflation. Complete hysteresis causes the economy to be unstable.
ISSN:1361-374X
1468-0106
DOI:10.1111/1468-0106.00061