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Macroeconomic policy in recessions and unemployment hysteresis

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  • Simon Sturn

Abstract

I adopt Ball's (1999) cross-sectional approach to test for unemployment hysteresis to panel data. Long-run unemployment is explained with standard institutional controls, and proxies for monetary and fiscal policy reactions in recessions. The sample consists of 20 OECD countries for the period 1985 to 2008. The results indicate that fiscal consolidation in recessions has long-lasting effects on unemployment. No significant impact of monetary policy is found. However, tentative evidence suggests that the effects of fiscal spending are stronger when accommodated by expansionary monetary policy.

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  • Simon Sturn, 2014. "Macroeconomic policy in recessions and unemployment hysteresis," Applied Economics Letters, Taylor & Francis Journals, vol. 21(13), pages 914-917, September.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:13:p:914-917
    DOI: 10.1080/13504851.2014.899660
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    References listed on IDEAS

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    1. Laurence M. Ball & Davide Furceri & Mr. Daniel Leigh & Mr. Prakash Loungani, 2013. "The Distributional Effects of Fiscal Consolidation," IMF Working Papers 2013/151, International Monetary Fund.
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    Cited by:

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    2. Dávila-Ospina, Andrés O., 2023. "Hysteresis From Monetary Policy Mistakes: How Bad Could It Be?," Documentos CEDE 21003, Universidad de los Andes, Facultad de Economía, CEDE.
    3. Klara Zwickl & Franziska Disslbacher & Sigrid Stagl, 2016. "Work-sharing for a Sustainable Economy. WWWforEurope Working Paper No. 111," WIFO Studies, WIFO, number 58684, April.

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