Estimating Hysteresis Effects

• Francesco Furlanetto ^[2] ; Antoine Lepetit ^[3] ; Ørjan Robstad ^[4] ; Juan Rubio-Ramírez ^[1] ; Pal Ulvedal ^[4]
  1. [1] Emory University

     Emory University

     Estados Unidos

     
  2. [2] Norges Bank, Norway
  3. [3] Board of Governors of the Federal Reserve System.
  4. [4] Norges Bank

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• Localización: Documentos de trabajo ( FEDEA ), ISSN 1696-7496, Nº. 11, 2021, págs. 1-35
• Idioma: inglés
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• Resumen

  • In this paper we identify demand shocks that can have a permanent effect on output through hysteresis effects. We call these shocks permanent demand shocks. They are found to be quantitatively important in the United States, in particular when the Great Recession is included in the sample. Recessions driven by perma- nent demand shocks lead to a permanent decline in employment and investment (including R&D investment), while output per worker is largely unaffected. We find strong evidence that hysteresis transmits through a rise in long-term unemployment and a decline in labor force participation and disproportionately affects the least productive workers.