Resource title

Unemployment, Growth and Fiscal Policy : New Insights on the Hysteresis Hypothesis

Resource image

image for OpenScout resource :: Unemployment, Growth and Fiscal Policy : New Insights on the Hysteresis Hypothesis

Resource description

We develop a growth model with unemployment due to imperfections in the labor market. In this model, wage inertia and balanced budget rules cause a complementarity between capital and employment capable of explaining the existence of multiple equilibrium paths. Hysteresis is viewed as the result of a selection between these different equilibrium paths. We use this model to argue that, in contrast to the US, those fiscal policies followed by most of the European countries after the shocks of the 1970?s may have played a central role in generating hysteresis.

Resource author

Valeri Sorolla, H├ęctor Sala, Xavier Raurich

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20362

Resource license

Adapt according to the presented license agreement and reference the original author.