Unemployment hysteresis and the NAIRU: a ratchet model

Smyth, David and Easaw, Joshy ORCID: https://orcid.org/0000-0003-3476-4300 2010. Unemployment hysteresis and the NAIRU: a ratchet model. Applied Economics Letters 8 (6) , pp. 359-362. 10.1080/135048501750237775

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Abstract

In the 1970s and 1980s the USA and European economies experienced unemployment rates that persistently drifted upwards. The present paper captures this phenomenon by a simple extension of the hysteresis approach to the natural rate hypothesis of unemployment using a ratchet model. The impact of peak unemployment levels on unemployment hysteresis is incorporated using a traditional ratchet model. The model is estimated for the USA economy for the period 1948 to 1998. The results indicate that the relationship approximates a full hysteresis effect for peak-to-peak unemployment levels.

Item Type:	Article
Date Type:	Published Online
Status:	Published
Schools:	Business (Including Economics)
ISSN:	1466-4291
Last Modified:	26 Oct 2022 08:16
URI:	https://orca.cardiff.ac.uk/id/eprint/127066

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