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Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States

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  • Morten O. Ravn

    (EUI and CEPR)

  • Saverio Simonelli

    () (Università di Napoli Federico II, EUI and CSEF)

Abstract

We use a 12-dimensional VAR to examine the dynamic e®ects on the labor market of four structural technology and policy shocks. For each shock, we examine the dynamic effects on the labor market, the importance of the shock for labor market volatility, and the comovement between labor market variables and other key aggregate variables in response to the shock. We document that labor market indicators display ”hump-shaped” responses to the identified shocks. Technology shocks and monetary policy shocks are important for labor market volatility but the ranking of their importance is sensitive to the VAR specification. The conditional correlations at business cycle frequencies are similar in response to the four shocks apart from the correlations between hours worked, labor productivity and real wages. To account for the unconditional correlations between these variables, a mixture of shocks are required.

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Bibliographic Info

Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 182.

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Date of creation: 01 Jul 2007
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Publication status: Published in Scandinavian Journal of Economics, 2008, vol. 109(4), pages 743-777
Handle: RePEc:sef:csefwp:182

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Keywords: Structural VAR; labor market dynamics; the Beveridge curve;

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