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Th i s s tud y i nve s ti gat e s w he t her f i scal p olic y is abl e t o affec t t he tre nd of emp l oy me n t r a te , t r i gge r in g hy ste res is i nd e pe nd e nt ly fr o m GDP be h avi or . I atte m p t t o s he d a l ig h t o n th i s is sue a na ly zi n g a Pa nel of 17 O EC D cou n tr ie s, c o ve r i n g t he pe r i od 198 0 -200 9 w it h a n nual d a ta . T he ef fect s of fisc al p o lic y ar e e s ti ma te d wit h a S VA R, w here t he ex o gen ou s fi sca l s h oc k is id e n ti fie d e mp l oy i n g a r e cen t d at ase t pr ov id e d by t he I MF, c o n tai ni n g pre d e te r m i ne d f i sc al po l ic y c ha n ges d ue t o fi sca l c o ns o lid a ti o n i ss ues . My resul t s su g ge st th at a f is c al s h ock ca n mod ify th e emp l oyme n t equi li br iu m leve l e ve n wi t h out i nf lu e nc i n g p ote n ti al ou t put . T he fi sca l mul ti pl ier f or th e e m pl oy me n t r ate tr e nd afte r t wo year s i s -0. 55 a nd acc ou n ts f or al m o st hal f o f t he mul ti p lie r f or ove r all e m pl oy me nt ra te (w h ic h i s -1 .1 0) , w hil e i s -0. 11 -a nd n o t s ig n ific an t -for t he p o te nt ial ou tp ut . T he m ul ti pl ier f or th e r e al p e r c a pi ta G DP i s -1 .04 , w hic h s h arp ly c o ntr as t s wi t h t he "ex pa n si o nar y aus te r ity " hy p o t he si s. Var i ou s exte n si o n s are pre se nt e d , co ns id e r in g t he r o le of co m p os it i o n, m o ne tary p o licy , a nd s ta ted epe nd e nc y . S pe nd in g c ut s affec t em p l oy me nt mo re t ha n ta x i ncrea se s, w hi le ta x e ffe c ts ar e lar ge r o n rea l pe r cap it a G DP. Su ch a re sul t m ay b e exp lai ne d by d if fe r e nt r e act io n s of m o net ar y p ol icy. T he e vid e nc e ad voc ate s t ha t the m ult ip lier i s s tate -d e pe n d en t, i.e . lar ger d ur i n g rec e s si o n s, an d suc h e ffe c t i s s tr on ger o n e m pl oy men t tre nd . Keywords AbstractThis study investigates whether fiscal policy is able to affect the trend of employment rate, triggering hysteresis independently from GDP behavior. I attempt to shed a light on this issue analyzing a Panel of 17 OECD countries, covering the period 1980-2009 with annual data. The effects of fiscal policy are estimated with a SVAR, where the exogenous fiscal shock is identified employing a recent dataset provided by the IMF, containing predetermined fiscal policy changes due to fiscal consolidation issues. My results suggest that a fiscal shock can modify the employment equilibrium level even without influencing potential output. The fiscal multiplier for the employment rate trend after two years is -0.55 and accounts for almost half of the multiplier for overall employment rate (which is -1.10), while is -0.11 -and not significant -for the potential output. The multiplier for the real per capita GDP is -1.04, which sharply contrasts with the "expansionary austerity" hypothesis. Various extensions are presented, considering the role of composition, monetary policy, and state-dependency. Spending ...

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