Hysteresis (economics)

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The hysteresis (from Greek. Ὑστέρεσις hysteresis "lack, deficiency, lagging") referred to in the economics , the response to external influences, a system does not return more to its original state after it has subsided. In simple terms, this means that the cause has disappeared, but the effect still continues.

While the Gabler Wirtschaftslexikon and Franz refer to economic systems, the definition of Baßeler, Heinrich and Utecht is generally related to systems.

The term hysteresis is borrowed from physics and cybernetics and stands for the delayed change in effect after a change in the cause.

Hysteresis in economics

In economics , the term is used to explain certain developments in the natural labor market and flexible exchange rates . The term persistence must be differentiated from hysteresis . In contrast to the hysteresis, the old equilibrium is restored after a brief shock , but this can take some time.

Hysteresis in the labor market

For the labor market, hysteresis means that current high unemployment , which has arisen as a result of exogenous shocks, will not decline even after these shocks have ceased. Rather, there is an increase in future natural unemployment .

One reason for this form of labor market hysteresis is long-term unemployment. Persistent unemployment means that qualifications and work motivation are lost and the willingness to actively look for a new job is reduced. Many companies avoid hiring the long-term unemployed. These no longer have any influence on the process of wage formation. Long-term unemployed are no longer available to employers as leverage in wage negotiations . The resulting in part excessive wage agreements cause the natural unemployment rate to shift upwards.

Example: hysteresis in the labor market

The oil price shock that occurred in the 1970s led to a sharp rise in the unemployment rate in Europe. In contrast, the price of oil fell sharply in the 1980s, but the unemployment rate continued to rise during these years.

The cause (oil price shock) no longer exists, but the effect (increased unemployment) continues.

Flexible exchange rate hysteresis

An exchange rate hysteresis occurs with a flexible exchange rate if there are high market entry and exit costs for the companies on export markets and they therefore wait a relatively long time in the event of changes in exchange rates until they enter or leave the market. Companies always see the risk of wrong decisions, as the exchange rates could change again in the next instant. Correcting the decision is associated with high costs.

Example: hysteresis with a flexible exchange rate

Due to an appreciation of the domestic currency, foreign companies enter the market. In the following period, there is a devaluation to the starting level. However, the companies are not leaving the market yet because of the market exit costs. In this case an exchange rate hysteresis arises. Because the original revaluation no longer exists, but the effect of higher imports has remained.

Individual evidence

  1. ↑ U. Baßeler, J. Heinrich, B. Utecht: Basics and problems of the national economy. 17th edition. Schäffer Poeschel, Stuttgart 2002, p. 781.
  2. ^ Gabler Wirtschaftslexikon. FH. 16th edition. Gabler, Wiesbaden 2004, p. 1423.
  3. ↑ O. Blanchard, G. Illing: Macroeconomics. 3. Edition. Pearson Education Deutschland GmbH, Munich 2003, p. 672.
  4. ↑ O. Blanchard, G. Illing: Macroeconomics. 3. Edition. Pearson Education Deutschland GmbH, Munich 2003, p. 667.
  5. ^ Gabler Wirtschaftslexikon. VZ. 16th edition. Gabler, Wiesbaden 2004, p. 3290.
  6. ^ Gabler Wirtschaftslexikon. VZ. 16th edition. Gabler, Wiesbaden 2004, p. 3290.

literature

  • U. Baßeler, J. Heinrich, B. Utecht: Fundamentals and problems of the national economy . Schäffer Poeschel, Stuttgart 2002, 2006. ISBN 3-7910-2547-3
  • O. Blanchard, G. Illing: Macroeconomics . 4th edition. Pearson Education Deutschland GmbH, Munich 2006. ISBN 3827372097
  • W. Franz: Labor Economics . Springer Verlag, Berlin / Heidelberg / New York 2003, 2006. ISBN 3-540-32337-6
  • Katrin Alisch: Gabler Wirtschaftslexikon. Vol. 3. FH. 16th edition. Gabler, Wiesbaden 2004. ISBN 3-409-10386-4