The recent European experience of high persistent unemployment has led to the development of theories of unemployment hysteresis embodying the idea that the equilibrium unemployment rate depends on the history of the actual unemployment rate. This paper summarizes two directions of research on...

European unemployment is widely regarded as a problem of excessive real wages. This view as it is usually expressed carries the disturbing implication that there is a sharp conflict between the interests of those currently employed and the unemployed because it suggests that increases in...

At a minimum, they suggest that policies may need to become more aggressive, both ex-ante and ex-post, with a rebalancing of the roles of monetary, fiscal and financial policies. In particular, while low neutral rates decrease the scope for using monetary policy, they increase the scope for...