IDEAS home Printed from https://ideas.repec.org/p/red/sed015/435.html
   My bibliography  Save this paper

Self-Fulfilling Unemployment Crises

Author

Listed:
  • Javier Bianchi

    (Federal Reserve Bank of Minneapolis)

Abstract

This paper proposes a theory of self-fulfilling unemployment fluctuations driven by an aggregate demand externality. Expectations of high unemployment, lead to low income and low aggregate demand. In turn, low aggregate demand leads to expectations of deflation and high unemployment. I show that this feedback between expectations and aggregate demand can lead to the emergence of self-fulfilling fluctuations in involuntary unemployment. Quantitative analysis calibrated to Spain shows that episodes of large unemployment are a result of pessimistic expectations. We discuss the policy implications of this novel source of multiplicity.

Suggested Citation

  • Javier Bianchi, 2015. "Self-Fulfilling Unemployment Crises," 2015 Meeting Papers 435, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:435
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2015/paper_435.pdf
    Download Restriction: no
    ---><---

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed015:435. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.