Julien Bengui, Université de Montréal - April 5, 2019

April 5, 2019

Julien Bengui, Université de Montréal will present a seminar at 4:00 PM in Arts 807

Seminar Title:  Slow Recoveries and Unemployment Traps: Monetary Policy in a Time of Hysteresis

Abstract:

We analyze monetary policy in a model where temporary shocks can permanently scar the economy’s productive capacity. Unemployed workers’ skill losses generate multiple steady-state unemployment rates. When monetary policy is constrained by the zero bound, large shocks reduce hiring to a point where the economy recovers slowly at best – at worst, it falls into a permanent unemployment trap. Since monetary policy is powerless to escape such traps ex-post, it must avoid them ex-ante. The model quantitatively accounts for the slow U.S. recovery following the Great Recession, and suggests that lack of swift monetary accommodation helps explain the European periphery’s stagnation.

This seminar is part of the Department of Economics Seminar Series. Everyone is welcome.