Seek and Ye Shall Not Find: The Absence of Hysteresis in U.S. Macroeconomic Data

Abstract: Economists are keenly interested in longer-run economic phenomena that interact with short-run shocks and business cycles. A particularly well-known example is hysteresis, which posits that disturbances typically thought of as transitory actually can have permanent effects. While this concept is well-recognized in theoretical modeling, empirical evidence has been sparse. After conducting a thorough analysis of U.S. macroeconomic data, we conclude that there has been no hysteresis in the United States for the past 60 years.

Keywords: Economic Growth and Fiscal Policy;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2021-02

Volume: 21

Issue: 04