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Hysteresis and Economic Fluctuations (Spain, 1970-94)

Author

Listed:
  • Dolado, Juan J.
  • López-Salido, J David

Abstract

This paper uses long-run restrictions on a three-variable system containing output growth, real wage growth and the differenced unemployment rate, to isolate three 'structural' shocks which drove business cycle fluctuations in Spain during 1970-94. These shocks are interpreted as aggregate demand, labour demand and labour supply disturbances in a framework where there is unit-root persistence in the unemployment rate. Our basic finding is that disinflationary policies in an economy suffering from high persistence can become very costly in terms of unemployment, unless supply-side reforms, aimed at eliminating the sources of persistence, are implemented.

Suggested Citation

  • Dolado, Juan J. & López-Salido, J David, 1996. "Hysteresis and Economic Fluctuations (Spain, 1970-94)," CEPR Discussion Papers 1334, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1334
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    Citations

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    Cited by:

    1. Céline Choulet, 2006. "Public jobs creation and unemployment dynamics," Cahiers de la Maison des Sciences Economiques v06026, Université Panthéon-Sorbonne (Paris 1).
    2. Lawrence Huiyan Zhang, 2001. "Sacrifice Ratios with Long-Lived Effects," Economics Working Paper Archive 446, The Johns Hopkins University,Department of Economics.

    More about this item

    Keywords

    Hysteresis; Recessions; Shocks; Structural VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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