This paper argues that hysteresis helps explain the long-run behavior of unemployment. The natural rate of unemployment is influenced by the path of actual unemployment, and hence by shifts in aggregate demand. I review past evidence for hysteresis effects and present new evidence for 20...

This paper seeks to understand the behavior of Greenspan's Federal Reserve in the late 1990s. Some authors suggest that the Fed followed a simple quot;Taylor rulequot;, while others argue that it deviated from such a rule because it recognized that the quot;New Economyquot; permitted an easing...

This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our...

This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our...

This paper argues that hysteresis helps explain the long-run behavior of unemployment. The natural rate of unemployment is influenced by the path of actual unemployment, and hence by shifts in aggregate demand. I review past evidence for hysteresis effects and present new evidence for 20...

This paper asks why the NAIRU rose in most OECD countries in the 1980s. I find that a central cause was the tight monetary policy used to reduce inflation. The evidence comes from a cross-country comparison: countries with larger decreases in inflation and longer disinflationary periods have...

This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the OECD. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our...

This paper discusses the NAIRU -- the non-accelerating inflation rate of unemployment. It first considers the role of the NAIRU concept in business cycle theory, arguing that this concept is implicit in any model in which monetary policy influences both inflation and unemployment. The exact...