Unemployment : Natural Rate Epicycles of Hysteresis?

Cross, Rod (2014) Unemployment : Natural Rate Epicycles of Hysteresis? Discussion paper. University of Strathclyde, Glasgow.

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Abstract

This paper argues that the natural rate of unemployment hypothesis, in which equilibrium unemployment is determined by “structural” variables alone, is wrong: it is both implausible and inconsistent with the evidence. Instead, equilibrium unemployment is haunted by hysteresis. The curious history of the natural rate hypothesis is considered, curious because the authors of the hypothesis thought hysteresis to be relevant. The various methods that have been used to model hysteresis in economic systems are outlined, including the Preisach model with its selective, erasable memory properties. The evidence regarding hysteresis effects on output and unemployment is then reviewed. The implications for macroeconomic policy, and for the macroeconomics profession, are discussed.

  • Item type:Monograph(Discussion paper)
    ID code:68227
    Dates:
    Date
    Event
    19 February 2014
    Published
    Notes:Published as a paper within the Discussion Papers in Economics, No. 14-02 (2014)
    Subjects:Social Sciences > Economic Theory
    Department:Strathclyde Business School > Economics
    Depositing user: Pure Administrator
    Date deposited:04 Jun 2019 09:33
    Last modified:20 Nov 2024 16:26
    Related URLs:
    URI:https://strathprints.strath.ac.uk/id/eprint/68227
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