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Mismatch shocks and unemployment during the Great Recession

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Author Info

  • Francesco Furlanetto

    ()
    (Norges Bank (Central Bank of Norway))

  • Nicolas Groshenny

    ()
    (University of Adelaide, School of Economics)

Abstract

We investigate the macroeconomic consequences of .uctuations in the effectiveness of the labor-market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium-scale DSGE model with sticky prices and equilibrium search unemployment that features a shock to the matching efficiency (or mismatch shock). We find that this shock is almost irrelevant for unemployment fluctuations in normal times. However, it plays a somewhat larger role during the Great Recession when it contributes to raise the actual unemployment rate by 1.25 percentage points and the natural rate by 2 percentage points. Moreover, it is the only shock that generates a positive conditional correlation between unemployment and vacancies.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2013/16.

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Length: 49 pages
Date of creation: 28 Jun 2013
Date of revision:
Handle: RePEc:bno:worpap:2013_16

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Related research

Keywords: Search and marketing frictions; Unemployment; Natural rates;

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Cited by:
  1. Luca Sala & Ulf Söderstrom & Antonella Trigari, 2012. "Structural and Cyclical Forces in the Labor Market during the Great Recession: Cross-Country Evidence," NBER Chapters, in: NBER International Seminar on Macroeconomics 2012, pages 345-404 National Bureau of Economic Research, Inc.
  2. Lawrence J. Christiano & Martin S. Eichenbaum & Mathias Trabandt, 2013. "Unemployment and business cycles," International Finance Discussion Papers 1089, Board of Governors of the Federal Reserve System (U.S.).
  3. Luca Benati & Thomas A. Lubik, 2013. "The time-varying Beveridge curve," Working Paper 13-12, Federal Reserve Bank of Richmond.
  4. Rebecca Craigie & David Gillmore & Nicolas Groshenny, 2012. "Matching workers with jobs:how well is the New Zealand labour market doing?," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 75, pages 3-12, December.
  5. Gelain, Paolo & Guerrazzi, Marco, 2014. "A demand-driven search model with self-fulfilling expectations: The new `Farmerian' framework under scrutiny," MPRA Paper 55773, University Library of Munich, Germany.
  6. Paul Gomme & Damba Lkhagvasuren, 2013. "The Cyclicality of Search Intensity in a Competitive Search Model," Working Papers 13002, Concordia University, Department of Economics, revised Sep 2013.
  7. Thomas A. Lubik, 2013. "The shifting and twisting Beveridge curve: an aggregate perspective," Working Paper 13-16, Federal Reserve Bank of Richmond.

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