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The ins and outs of unemployment: An analysis conditional on technology shocks

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  • Fabio Canova

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  • David Lopez-Salido
  • Claudio Michelacci

Abstract

We analyze how unemployment, job finding and job separation rates react to neutral and investment-specific technology shocks. Neutral shocks increase unemployment and explain a substantial portion of it volatility; investment-specific shocks expand employment and hours worked and contribute to hours worked volatility. Movements in the job separation rates are responsible for the impact response of unemployment while job finding rates for movements along its adjustment path. The evidence warns against using models with exogenous separation rates and challenges the conventional way of modelling technology shocks in search and sticky price models.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1213.

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Date of creation: Oct 2009
Date of revision: Jan 2012
Handle: RePEc:upf:upfgen:1213

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Web page: http://www.econ.upf.edu/

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Keywords: Unemployment; technological progress; labor market flows; business cycle models.;

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