Authors
Robert Calvert Jump, Engelbert Stockhammer
Publication date
2023/11/14
Journal
Review of Keynesian Economics
Volume
11
Issue
4
Pages
489-506
Publisher
Edward Elgar Publishing Ltd
Description
The 2008 financial crisis saw a resurgence of interest in the hysteresis hypothesis, which was subsequently reflected in policy responses to the COVID-19 and cost-of-living crises. In this paper, we present new evidence in favour of the hysteresis hypothesis for Germany, France, and the United Kingdom, using a dataset that spans from 1960 to 2019. Our model is based on the popular unobserved components approach to estimating the degree of hysteresis, which is generalised to permit a reduced form Phillips curve that takes the form of an ARIMAX model. Our results are robust to ARCH effects and varying the sample span. They support contemporary warnings of the risk of scarring effects following the COVID-19 crisis, long-standing Post-Keynesian models of hysteresis, and the recent resurgence of mainstream interest in hysteresis.
Scholar articles
RC Jump, E Stockhammer - Review of Keynesian Economics, 2023