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The Impact of Monetary Policy on Unemployment Hysteresis

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  • Engelbert Stockhammer

    (Vienna University of Economics and Business Administration)

  • Simon Sturn

    (IMK at the Hans Boeckler Foundation)

Abstract

This paper investigates the hypothesis that the extent to which hysteresis occurs in the aftermath of recessions depends on monetary policy reactions. The degree of hysteresis is explained econometrically by the extent of monetary easing during a recession and by standard variables for labour market institutions in a pooled cross-country analysis using quarterly data. The sample includes 40 recessions in 19 OECD countries for which the required data is available. The time period lasts from 1980 to 2007. The paper builds on Ball (1999) and extends the sample of countries, the time period under investigation and the set of control variables.

Suggested Citation

  • Engelbert Stockhammer & Simon Sturn, 2008. "The Impact of Monetary Policy on Unemployment Hysteresis," IMK Working Paper 15-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:15-2008
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    Citations

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    Cited by:

    1. Engelbert Stockhammer & Rob Calvert Jump, 2022. "An Estimation of Unemployment Hysteresis," Working Papers PKWP2221, Post Keynesian Economics Society (PKES).
    2. David R. Howell, 2010. "Institutions, Aggregate Demand and Cross-Country Employment Performance: Alternative Theoretical Perspectives and the Evidence," Working Papers wp228, Political Economy Research Institute, University of Massachusetts at Amherst.
    3. Simon STURN, 2013. "Are corporatist labour markets different? Labour market regimes and unemployment in OECD countries," International Labour Review, International Labour Organization, vol. 152(2), pages 237-254, June.
    4. Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
    5. Davide Romaniello, 2022. "Unemployment gap, isteresi e disoccupazione di lunga durata: quale ruolo nella comprensione dell'inflazione? (Unemployment gap, hysteresis and long-term unemployment: which role in explaining inflatio," Moneta e Credito, Economia civile, vol. 75(299), pages 267-283.
    6. William D. Craighead, 2019. "Hysteresis In A New Keynesian Model," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 1082-1097, April.
    7. repec:prg:jnlpep:v:preprint:id:526:p:1-13 is not listed on IDEAS
    8. Simon Sturn, 2014. "Macroeconomic policy in recessions and unemployment hysteresis," Applied Economics Letters, Taylor & Francis Journals, vol. 21(13), pages 914-917, September.
    9. Dave Reifschneider & William Wascher & David Wilcox, 2015. "Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 71-109, May.
    10. Zwickl, Klara & Disslbacher, Franziska & Stagl, Sigrid, 2016. "Work-sharing for a sustainable economy," Ecological Economics, Elsevier, vol. 121(C), pages 246-253.
    11. Andrea Vaona, 2015. "Anomalous empirical evidence on money long-run super-neutrality and the vertical long-run Phillips curve," Working Papers 17/2015, University of Verona, Department of Economics.
    12. Antonio Rodriguez-Gil, 2018. "Hysteresis and labour market institutions. Evidence from the UK and the Netherlands," Empirical Economics, Springer, vol. 55(4), pages 1985-2025, December.
    13. repec:prg:jnlpep:v:2015:y:2015:i:5:id:526:p:1-13 is not listed on IDEAS
    14. Gordana Marjanovic & Ljiljana Maksimovic & Nenad Stanisic, 2015. "Hysteresis and the NAIRU: The Case of Countries in Transition," Prague Economic Papers, Prague University of Economics and Business, vol. 2015(5), pages 503-515.
    15. Di Domenico, Lorenzo & Gahn, Santiago José & Romaniello, Davide, 2024. "Testing the Waters of Positive Hysteresis: The Effects of Autonomous Demand Shocks on Inflation, Accumulation, and Labor in the US Economy," Centro Sraffa Working Papers CSWP64, Centro di Ricerche e Documentazione "Piero Sraffa".
    16. Tomasz Chmielewski & Mariusz Kapuściński & Andrzej Kocięcki & Tomasz Łyziak & Jan Przystupa & Ewa Stanisławska & Ewa Wróbel, 2018. "Monetary transmission mechanism in Poland. What do we know in 2017?," NBP Working Papers 286, Narodowy Bank Polski.
    17. Bassi, Federico & Lang, Dany, 2016. "Investment hysteresis and potential output: A post-Keynesian–Kaleckian agent-based approach," Economic Modelling, Elsevier, vol. 52(PA), pages 35-49.
    18. Váry, Miklós, 2018. "A hiszterézis közgazdasági jelentőségéről posztkeynesi szemléletben [The economic relevance of hysteresis from a post-Keynesian perspective]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1006-1047.
    19. Paternesi Meloni, Walter & Romaniello, Davide & Stirati, Antonella, 2022. "Inflation and the NAIRU: assessing the role of long-term unemployment as a cause of hysteresis," Economic Modelling, Elsevier, vol. 113(C).
    20. J. Bradford DeLong & Lawrence H. Summers, 2012. "Fiscal Policy in a Depressed Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 233-297.
    21. Simon Sturn, 2011. "Labour market regimes and unemployment in OECD countries," IMK Working Paper 6-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    22. Gerald Friedman, 2017. "A Future for Growth?," Review of Radical Political Economics, Union for Radical Political Economics, vol. 49(4), pages 652-662, December.
    23. Engelbert Stockhammer & Alexander Guschanski & Karsten Köhler, 2014. "Unemployment, capital accumulation and labour market institutions in the Great Recession," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 182-194, September.
    24. Sturn, Simon & Epstein, Gerald, 2021. "How much should we trust five-year averaging to purge business cycle effects? A reassessment of the finance-growth and capital accumulation-unemployment nexus," Economic Modelling, Elsevier, vol. 96(C), pages 242-256.

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    More about this item

    Keywords

    monetary policy; NAIRU; structual unemployment; hysteresis; endogenous NAIRU;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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