Macroeconomic policy in recessions and unemployment hysteresis

Simon Sturn

doi:10.1080/13504851.2014.899660

Macroeconomic policy in recessions and unemployment hysteresis

Simon Sturn

Institute for Ecological Economics

Publication: Scientific journal › Journal article › peer-review

Abstract

I adopt Balls (1999) cross-sectional approach to test for unemployment hysteresis to panel data. Long-run unemployment is explained with standard institutional controls, and proxies for monetary and fiscal policy reactions in recessions. The sample consists of 20 OECD countries for the period 1985 to 2008. The results indicate that fiscal consolidation in recessions has long-lasting effects on unemployment. No significant impact of monetary policy is found. However, tentative evidence suggests that the effects of fiscal spending are stronger when accommodated by expansionary monetary policy.

Original language	English
Pages (from-to)	914 - 917
Journal	Applied Economics Letters
Volume	21
Issue number	13
DOIs	https://doi.org/10.1080/13504851.2014.899660
Publication status	Published - 2014

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title = "Macroeconomic policy in recessions and unemployment hysteresis",

abstract = "I adopt Balls (1999) cross-sectional approach to test for unemployment hysteresis to panel data. Long-run unemployment is explained with standard institutional controls, and proxies for monetary and fiscal policy reactions in recessions. The sample consists of 20 OECD countries for the period 1985 to 2008. The results indicate that fiscal consolidation in recessions has long-lasting effects on unemployment. No significant impact of monetary policy is found. However, tentative evidence suggests that the effects of fiscal spending are stronger when accommodated by expansionary monetary policy.",

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year = "2014",

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N2 - I adopt Balls (1999) cross-sectional approach to test for unemployment hysteresis to panel data. Long-run unemployment is explained with standard institutional controls, and proxies for monetary and fiscal policy reactions in recessions. The sample consists of 20 OECD countries for the period 1985 to 2008. The results indicate that fiscal consolidation in recessions has long-lasting effects on unemployment. No significant impact of monetary policy is found. However, tentative evidence suggests that the effects of fiscal spending are stronger when accommodated by expansionary monetary policy.

AB - I adopt Balls (1999) cross-sectional approach to test for unemployment hysteresis to panel data. Long-run unemployment is explained with standard institutional controls, and proxies for monetary and fiscal policy reactions in recessions. The sample consists of 20 OECD countries for the period 1985 to 2008. The results indicate that fiscal consolidation in recessions has long-lasting effects on unemployment. No significant impact of monetary policy is found. However, tentative evidence suggests that the effects of fiscal spending are stronger when accommodated by expansionary monetary policy.

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DO - 10.1080/13504851.2014.899660

M3 - Journal article

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SP - 914

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JO - Applied Economics Letters

JF - Applied Economics Letters

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