Sulkin, Daniel Paul. “Hysteresis in the Current Recession”. BS, Boston College, 2012. http://hdl.handle.net/2345/2643.
Hysteresis, in an economic context, is the idea that periods when the unemployment rate is greater than the natural rate have the effect of raising the underlying natural rate of unemployment (or, non-accelerating inflation rate of unemployment, NAIRU) and moving it to a new higher equilibrium state. The existence of hysteresis is still a matter of dispute in modern economics.This study examines the economic and employment situation from 1980 to the present and in particular since the beginning of the most recent recession in December 2007 and demonstrates that there exists evidence of hysteresis. It then aims to predict the economic consequences for the future and offers possible solutions to the problem.Given the scale of unemployment in the present economy and the importance of crafting an appropriate policy response, an examination of unemployment through the perspective of the hysteresis theory is a valuable approach that deserves further exploration.