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Unemployment hysteresis and the natural rate of vacancies

  • By Knut Røed

    ()

    (The Frisch Centre for Economic Research, Gaustadalléen 21, 0349 Oslo, Norway)

On the basis of macro data from 10 OECD countries, I find that the job vacancy rate outperforms the unemployment rate as a reliable measure of domestic inflationary pressure. Moreover, while the rate of unemployment affects inflation primarily through its difference, the vacancy rate operates through a level effect as well. In most countries, a unique equilibrium rate of vacancies seems to coexist with a drifting equilibrium rate of unemployment. I show that this result is consistent with existing theories of unemployment hysteresis that focus on depreciation of human capital and search activity during unemployment spells.

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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 27 (2002)
Issue (Month): 4 ()
Pages: 687-704

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Handle: RePEc:spr:empeco:v:27:y:2002:i:4:p:687-704
Note: received: October 1997/Final version received: June 2001
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