IDEAS home Printed from https://ideas.repec.org/p/ltv/dpaper/201502.html
   My bibliography  Save this paper

Natural and Cyclical Unemployment in Latvia: New Insights from the Beveridge Curve Model

Author

Listed:
  • Olegs Krasnopjorovs

    (Bank of Latvia)

Abstract

Whether current unemployment in Latvia is mostly structural or cyclical recently provoked an intense debate among policy makers and academic researchers. This paper follows the method proposed by Barlevy (2011) to estimate natural and cyclical components of unemployment from the Beveridge curve model. It finds that at the end of 2014 unemployment in Latvia was quite similar to its natural rate. Zero cyclical component of unemployment suggests that aggregate-demand-stimulating policies would not bring unemployment down without creating inflationary pressures and competitiveness loss and, therefore, are not a preferred option. Instead, raising matching efficiency between the unemployed and vacancies would decrease natural unemployment from its current high of about 11%. Moreover, it was found that the lowest matching efficiency between the unemployed and vacancies is present among workers (compared to managers and professionals) and typical for Latgale region. This might reflect significant structural problems rather than low business cycle synchronisation with the other occupational groups and regions.

Suggested Citation

  • Olegs Krasnopjorovs, 2015. "Natural and Cyclical Unemployment in Latvia: New Insights from the Beveridge Curve Model," Discussion Papers 2015/02, Latvijas Banka.
    • Handle: RePEc:ltv:dpaper:201502
    as

    Download full text from publisher

    File URL: https://www.bank.lv/images/stories/pielikumi/publikacijas/dp_2_2015_en.pdf
    Download Restriction: no
    File URL: https://www.macroeconomics.lv/sites/default/files/dm_2_krasnopjorovs_2015_en.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gadi Barlevy, 2011. "Evaluating the role of labor market mismatch in rising unemployment," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 35(Q III), pages 82-96.
    2. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    3. Mr. Christian H Ebeke & Greetje Everaert, 2014. "Unemployment and Structural Unemployment in the Baltics," IMF Working Papers 2014/153, International Monetary Fund.
    4. Camarero, Mariam & Carrion-i-Silvestre, Josep Lluis & Tamarit, Cecilio, 2005. "Unemployment dynamics and NAIRU estimates for accession countries: A univariate approach," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 584-603, September.
    5. Aleksejs Meļihovs & Anna Zasova, 2009. "Assessment of the natural rate of unemployment and capacity utilisation in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 9(2), pages 25-46, December.
    6. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(2 (Fall)), pages 325-388.
    7. Vanags, Alf & Sonin, Konstantin & Anosova, Daria & Zasova, Anna, 2013. "Structural or Cyclical? Unemployment in Latvia Since the 2008-09 Financial Crisis," CEPR Discussion Papers 9525, C.E.P.R. Discussion Papers.
    8. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery: Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 325-388.
    9. Ieva Brauksa & Ludmila Fadejeva, 2013. "Internal Labour Market Mobility in 2005-2011: The Case of Latvia," Working Papers 2013/02, Latvijas Banka.
    10. Aleksejs Melihovs & Anna Zasova, 2007. "Estimation of the Phillips Curve for Latvia," Working Papers 2007/03, Latvijas Banka.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olegs Krasnopjorovs, 2019. "Anatomy of labour reserves in the Baltic countries: a snapshot 15 years after the EU accession," Discussion Papers 2019/02, Latvijas Banka.
    2. Konstantins Benkovskis & Eduards Goluzins & Olegs Tkacevs, 2016. "CGE model with fiscal sector for Latvia," Working Papers 2016/01, Latvijas Banka.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Māra Bukovska & Marija Krūmiņa & Alf Vanags & Linda Vildava, 2016. "The rise of the dual labour market: fighting precarious employment in the new member states through industrial relations (PRECARIR) Country report: Latvia," Research Reports 16, Central European Labour Studies Institute (CELSI).
    2. Bas B. Bakker & Marta Korczak, 2017. "Phoenix from the Ashes: The Recovery of the Baltics from the 2008/2009 Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(4), pages 520-544, December.
    3. Ludmila Fadejeva & Olegs Krasnopjorovs, 2015. "Labour market adjustment during 2008-2013 in Latvia: firm level evidence," Working Papers 2015/02, Latvijas Banka.
    4. Mr. Joong S Kang & Mr. Jay C Shambaugh, 2014. "Progress Towards External Adjustment in the Euro Area Periphery and the Baltics," IMF Working Papers 2014/131, International Monetary Fund.
    5. Jekaterina Navicke, 2020. "Driving factors behind the changes in income distribution in the Baltics: income, policy, demography," GRAPE Working Papers 44, GRAPE Group for Research in Applied Economics.
    6. Pierre-Olivier Gourinchas & Thomas Philippon & Dimitri Vayanos, 2017. "The Analytics of the Greek Crisis," NBER Macroeconomics Annual, University of Chicago Press, vol. 31(1), pages 1-81.
    7. Vladimir Mihajlović & Gordana Marjanović, 2020. "Asymmetries in effects of domestic inflation drivers in the Baltic States: a Phillips curve-based nonlinear ARDL approach," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 20(1), pages 94-116.
    8. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery: Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 325-388.
    9. Marcelo Veracierto, 2011. "Worker flows and matching efficiency," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 35(Q IV), pages 147-169.
    10. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
    11. Krasnopjorovs Olegs, 2020. "Have the Baltic Countries Run Out of Labour Reserves?," Baltic Journal of European Studies, Sciendo, vol. 10(3), pages 45-66, December.
    12. Zsóka Kóczán, 2016. "Fiscal policy, business cycles and discretion: evidence from the Western Balkans," Post-Communist Economies, Taylor & Francis Journals, vol. 28(4), pages 468-486, October.
    13. Rudolfs Bems & Julian di Giovanni, 2016. "Income-Induced Expenditure Switching," American Economic Review, American Economic Association, vol. 106(12), pages 3898-3931, December.
    14. Anders Aslund, 2014. "Revisiting the Latvian and Greek Financial Crises: The Benefits of Front-Loading Fiscal Adjustment," CASE Network Studies and Analyses 0477, CASE-Center for Social and Economic Research.
    15. D�ra Győrffy, 2015. "Austerity and growth in Central and Eastern Europe: understanding the link through contrasting crisis management in Hungary and Latvia," Post-Communist Economies, Taylor & Francis Journals, vol. 27(2), pages 129-152, June.
    16. René Böheim & Michael Christl, 2022. "Mismatch unemployment in Austria: the role of regional labour markets for skills," Regional Studies, Regional Science, Taylor & Francis Journals, vol. 9(1), pages 208-222, December.
    17. Olivier Blanchard & Mark Griffiths & Bertrand Gruss, 2013. "Boom, Bust, Recovery Forensics of the Latvia Crisis," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 47(2 (Fall)), pages 325-388.
    18. Sedláček, Petr, 2014. "Match efficiency and firms' hiring standards," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 123-133.
    19. Gyöngyösi, Győző & Rariga, Judit & Verner, Emil, 2021. "The anatomy of consumption in a household foreign currency debt crisis," SAFE Working Paper Series 332, Leibniz Institute for Financial Research SAFE.
    20. International Monetary Fund, 2015. "Republic of Latvia: Selected Issues," IMF Staff Country Reports 2015/111, International Monetary Fund.

    More about this item

    Keywords

    unemployment; vacancies; Beveridge curve; cyclical unemployment; natural unemployment; structural unemployment;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ltv:dpaper:201502. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Konstantins Benkovskis (email available below). General contact details of provider: https://edirc.repec.org/data/bolgvlv.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.