The role of demand management policies in reducing unemployment
This paper considers the scope for demand management policies to reduce the present high levels of European unemployment. While the evidence suggests that contractionary demand shocks are partly to blame, the presence of endogenous persistence mechanisms limit the scope for effective activist policies. Furthermore, in isolation they can do nothing to tackle the significant fraction due to adverse supply, or structural, developments. However, if appropriate supply-side policies are introduced, supportive demand management policies can speed the reduction in unemployment. The paper considers what such supportive demand management policies should look like and argues that in some cases a mild, although temporary, increase in inflation may be appropriate. The implications of uncertainty about the equilibrium rate of unemployment are also considered. The paper argues that such supportive policies are probably best sustained through monetary rather than fiscal policies and are likely to require changes in intra-European real exchange rates. Consequently a rapid move to full monetary union may be ill advised. Finally a potential role for temporary incomes policies is also identified.
(This abstract was borrowed from another version of this item.)
Volume (Year): (1994)
Issue (Month): Jan ()
|Contact details of provider:|| Postal: |
Phone: (816) 881-2254
Web page: http://www.kansascityfed.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Meade, James E, 1993.
"The Meaning of "Internal Balance.","
American Economic Review,
American Economic Association, vol. 83(6), pages 3-9, December.
- Bean, Charles R, 1983. "Targeting Nominal Income: An Appraisal," Economic Journal, Royal Economic Society, vol. 93(372), pages 806-19, December.
- Blanchard, Olivier Jean & Diamond, Peter A, 1994.
"Ranking, Unemployment Duration, and Wages,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(3), pages 417-34, July.
- Blanchard, O.J. & Diamond, P., 1990. "Ranking, Unemployment Duration, And Wages," Working papers 546, Massachusetts Institute of Technology (MIT), Department of Economics.
- Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A & Rockett, Katharine E, 1988. "International Macroeconomic Policy Coordination When Policymakers Do Not Agree on the True Model," American Economic Review, American Economic Association, vol. 78(3), pages 318-40, June.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780199279173, March.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
- Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
When requesting a correction, please mention this item's handle: RePEc:fip:fedkpr:y:1994:i:jan:p:99-167. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lu Dayrit)
If references are entirely missing, you can add them using this form.