TY  - JOUR
TI  - Slow Recoveries and Unemployment Traps: Monetary Policy in a Time of Hysteresis*
AU  - Acharya, Sushant
AU  - Bengui, Julien
AU  - Dogra, Keshav
AU  - Wee, Shu Lin
PY  - 2022
PB  - Oxford University Press (OUP)
LA  - eng
AB  - Abstract<br />               We analyse monetary policy in a model where temporary shocks can permanently scar the economy's productive capacity. Workers lose skill while unemployed and are costly to retrain, generating multiple steady-state unemployment rates. Following a large shock, unless monetary policy acts aggressively and quickly enough to prevent a significant rise in unemployment, hiring falls to a point where the economy recovers slowly at best—at worst, it falls into a permanent unemployment trap. Monetary policy can only avoid these outcomes if it commits in a timely manner to more accommodative policy in the future. Timely commitment is essential as the effectiveness of monetary policy is state dependent: once the recession has left substantial scars, monetary policy cannot speed up a slow recovery, or escape from an unemployment trap.
UR  - https://doi.org/10.1093/ej/ueac016
DO  - 10.1093/ej/ueac016
T2  - The economic journal: the journal of the Royal Economic Society
VL  - 132
IS  - 646
SN  - 1468-0297
SP  - 2007-2047
UR  - https://www.pollux-fid.de/r/cr-10.1093/ej/ueac016
H1  - Pollux (Fachinformationsdienst Politikwissenschaft)
ER  -