This paper reviews the evidence on the effects of recessions on potential output. In contrast to the assumption in mainstream macroeconomic models that economic fluctuations do not change potential output paths, the evidence is that they do in the case of recessions. A model is proposed to...

Two fundamental problems in economic analysis concern the determination of aggregate output, and the determination of market prices and quantities. The way economic adjustments are made at the micro level suggests that the history of shocks to the economic environment matters. This paper...

This paper elucidates hysteresis using a simple model of market entry and exit. A procedure for calculating hysteresis indices for economic time series is outlined. Some preliminary results assess the explanatory power of hysteresis variables in determining the equilibrium rate of unemployment...

The efficient markets hypothesis implies that arbitrage opportunities in markets such as those for foreign exchange (FX) would be, at most, short-lived. The present paper surveys the fragmented nature of FX markets, revealing that information in these markets is also likely to be fragmented. The...

This paper argues that the natural rate of unemployment hypothesis, in which equilibrium unemployment is determined by “structural†variables alone, is wrong: it is both implausible and inconsistent with the evidence. Instead, equilibrium unemployment is haunted by...

If financial markets displayed the informational efficiency postulated in the efficient markets hypothesis (EMH), arbitrage operations would be self-extinguishing. The present paper considers arbitrage sequences in foreign exchange (FX) markets, in which trading platforms and information are...

The efficient markets hypothesis implies that arbitrage opportunities in markets such as those for foreign exchange (FX) would be, at most, short-lived. The present paper surveys the fragmented nature of FX markets, revealing that information in these markets is also likely to be fragmented. The...