Download or read book Hysteresis in Unemployment and Jobless Recoveries written by Dmitry Plotnikov and published by International Monetary Fund. This book was released on 2014-05-06 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops and estimates a general equilibrium rational expectations model with search and multiple equilibria where aggregate shocks have a permanent effect on the unemployment rate. If agents' wealth decreases, the unemployment rate increases for a potentially indefinite period. This makes unemployment rate dynamics path dependent as in Blanchard and Summers (1987). I argue that this feature explains the persistence of the unemployment rate in the U.S. after the Great Recession and over the entire postwar period.