The Stagnation Regime of the New Keynesian Model and Current US Policy

In Evans, Guse, and Honkapohja (2008) the intended steady state is locally but not globally stable under adaptive learning, and unstable deflationary paths can arise after large pessimistic shocks to expectations. In the current paper a modified model is presented that includes a locally stable stagnation regime as a possible outcome arising from large expectation shocks. Policy implications are examined. Sufficiently large temporary increases in government spending can dislodge the economy from the stagnation regime and restore the natural stabilizing dynamics. More specific policy proposals are presented and discussed.

Is Graduate Under-employment Persistent? Evidence from the United Kingdom

This paper examines the persistence of under-employment amongst UK higher education graduates. For the cohort of individuals who graduated in 2002/3, micro-data collected by the Higher Education Statistical Agency, are used to calculate the rates of "non-graduate job" employment 6 months and 42 months after graduation. A logic regression analysis suggests the underemployment is not a short-term phenomenon and is systematically related to a set of observable characteristics. It is also found that under-employment 42 months after graduation, which is consistent with the view that the nature of the first job after graduation is important in terms of occupational attainment later in the life-cycle.