Academic Commons

Reports

High Unemployment in Europe: Diagnosis and Policy Implications

Sachs, Jeffrey D.

Econometric evidence suggests that the non-accelerating inflation rate of unemployment (the NAIRU) has risen sharply in Europe in the past fifteen years. In the first section of this paper, I review the recent proliferation of supply-side models that say interesting things about why the NAIRU has increased so substantially in Europe. In the second section of the paper, I employ a simple example to show how aggregate demand should optimally be managed in response to transitory and permanent supply shocks, especially those shocks that cause a persistent rise in the NAIRU. Also, I discuss some policy implications of the increasingly popular "hysteresis hypothesis," that the NAIRU itself is influenced by the time path of actual unemployment.

Geographic Areas

Files

More About This Work

Academic Units
Earth Institute
Publisher
National Bureau of Economic Research
Series
NBER Working Paper, 1830
Published Here
September 29, 2009

Notes

Published as part of Unemployment in Europe: Analysis and Policy Issues (Stockholm: Timbro, 1986).

Academic Commons provides global access to research and scholarship produced at Columbia University, Barnard College, Teachers College, Union Theological Seminary and Jewish Theological Seminary. Academic Commons is managed by the Columbia University Libraries.