This paper reviews the ability of the traditional aggregate demand–aggregate supply framework to explain the unemployment fluctuations of the last three decades. A structural VAR model for the growth rates of labor productivity, inflation and unemployment is estimated on American and French...

Keynes' main concern in the General Theory is about the capacity of an economy to return to a full employment equilibrium when subject to a (negative) demand shock. He maintains that money wages cuts may not help reabsorb unemployment, as they do not necessarily imply a fall in real wages. On...