Endogenous growth, skill obsolescence and output hysteresis in a new Keynesian model with unemployment

  • The authors embed human capital-based endogenous growth into a New-Keynesian model with search and matching frictions in the labor market and skill obsolescence from long-term unemployment. The model can account for key features of the Great Recession: a decline in productivity growth, the relative stability of inflation despite a pronounced fall in output (the "missing disinflation puzzle"), and a permanent gap between output and the pre-crisis trend output. In the model, lower aggregate demand raises unemployment and the training costs associated with skill obsolescence. Lower employment hinders learning-by-doing, which slows down human capital accumulation, feeding back into even fewer vacancies than justified by the demand shock alone. These feedback channels mitigate the disinflationary effect of the demand shock while amplifying its contractionary effect on output. The temporary growth slowdown translates into output hysteresis (permanently lower output and labor productivity).

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Metadaten
Author:Wolfgang LechthalerGND, Mewael F. TesfaselassieGND
URN:urn:nbn:de:hebis:30:3-564462
URL:https://www.imfs-frankfurt.de/fileadmin/user_upload/IMFS_WP/IMFS_WP_149.pdf
Parent Title (English):Working paper series / Institute for Monetary and Financial Stability ; 149
Series (Serial Number):Working paper series / Institute for Monetary and Financial Stability (149)
Publisher:Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2021
Year of first Publication:2021
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2021/01/19
Tag:endogenous growth; monetary policy; nominal rigidity; output hysteresis; search and matching; unemployment
Page Number:37
HeBIS-PPN:475489071
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht