IDEAS home Printed from https://ideas.repec.org/a/wly/quante/v8y2017i2p611-650.html
   My bibliography  Save this article

Solving the Diamond–Mortensen–Pissarides model accurately

Author

Listed:
  • Nicolas Petrosky‐Nadeau
  • Lu Zhang

Abstract

An accurate global projection algorithm is critical for quantifying the basic moments of the Diamond–Mortensen–Pissarides model. Log linearization understates the mean and volatility of unemployment, but overstates the volatility of labor market tightness and the magnitude of the unemployment–vacancy correlation. Log linearization also understates the impulse responses in unemployment in recessions, but overstates the responses in the market tightness in booms. Finally, the second‐order perturbation in logs can induce severe Euler equation errors, which are often much larger than those from log linearization.

Suggested Citation

  • Nicolas Petrosky‐Nadeau & Lu Zhang, 2017. "Solving the Diamond–Mortensen–Pissarides model accurately," Quantitative Economics, Econometric Society, vol. 8(2), pages 611-650, July.
    • Handle: RePEc:wly:quante:v:8:y:2017:i:2:p:611-650
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/
    Download Restriction: no
    ---><---

    Citations

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


    Cited by:

    1. Kohlbrecher, Britta & Merkl, Christian, 2022. "Business cycle asymmetries and the labor market," Journal of Macroeconomics, Elsevier, vol. 73(C).
    2. Drautzburg, Thorsten & Fernández-Villaverde, Jesús & Guerrón-Quintana, Pablo, 2021. "Bargaining shocks and aggregate fluctuations," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    3. Chase Coleman & Spencer Lyon & Lilia Maliar & Serguei Maliar, 2021. "Matlab, Python, Julia: What to Choose in Economics?," Computational Economics, Springer;Society for Computational Economics, vol. 58(4), pages 1263-1288, December.
    4. Guerra Vallejos, Ernesto & Bobenrieth Hochfarber, Eugenio & Bobenrieth Hochfarber, Juan & Wright, Brian D., 2021. "Solving dynamic stochastic models with multiple occasionally binding constraints," Economic Modelling, Elsevier, vol. 105(C).
    5. Francesco Zanetti & Konstantinos Theodoridis, 2018. "State Dependence in Labor Market Fluctuations: Evidence, Theory, and Policy Implications," Economics Series Working Papers 856, University of Oxford, Department of Economics.
    6. Toshihiko Mukoyama, 2019. "Heterogeneous Jobs and the Aggregate Labour Market," The Japanese Economic Review, Springer, vol. 70(1), pages 30-50, March.
    7. Bai, Hang & Zhang, Lu, 2022. "Searching for the equity premium," Journal of Financial Economics, Elsevier, vol. 143(2), pages 897-926.
    8. Stéphane Dupraz & Emi Nakamura & Jón Steinsson, 2019. "A Plucking Model of Business Cycles," NBER Working Papers 26351, National Bureau of Economic Research, Inc.
    9. Petrosky-Nadeau, Nicolas & Zhang, Lu, 2021. "Unemployment crises," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 335-353.
    10. Max Breitenlechner & Johann Scharler, 2020. "Private Sector Debt, Financial Constraints, and the Effects of Monetary Policy: Evidence from the US," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(4), pages 889-915, August.
    11. Nicolas Petrosky-Nadeau & Lu Zhang & Lars-Alexander Kuehn, 2018. "Endogenous Disasters," American Economic Review, American Economic Association, vol. 108(8), pages 2212-2245, August.
    12. White, Neil, 2022. "An envelope method for solving continuous-time stochastic models with occasionally binding constraints," Economics Letters, Elsevier, vol. 214(C).
    13. Donayre, Luiggi, 2022. "On the behavior of Okun's law across business cycles," Economic Modelling, Elsevier, vol. 112(C).
    14. Bai, Hang, 2021. "Unemployment and credit risk," Journal of Financial Economics, Elsevier, vol. 142(1), pages 127-145.
    15. Bai, Hang & Hou, Kewei & Kung, Howard & Li, Erica X.N. & Zhang, Lu, 2019. "The CAPM strikes back? An equilibrium model with disasters," Journal of Financial Economics, Elsevier, vol. 131(2), pages 269-298.
    16. Bernstein, Joshua & Richter, Alexander W. & Throckmorton, Nathaniel A., 2021. "Cyclical net entry and exit," European Economic Review, Elsevier, vol. 136(C).
    17. Sylvain Leduc & Chitra Marti & Daniel J. Wilson, 2019. "Does Ultra-Low Unemployment Spur Rapid Wage Growth?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    18. Brunner, Daniel & Heiss, Florian & Romahn, André & Weiser, Constantin, 2017. "Reliable estimation of random coefficient logit demand models," DICE Discussion Papers 267, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    19. Robert Kirkby, 2023. "Quantitative Macroeconomics: Lessons Learned from Fourteen Replications," Computational Economics, Springer;Society for Computational Economics, vol. 61(2), pages 875-896, February.
    20. James Bishop & Emma Greenland, 2021. "Is the Phillips Curve Still a Curve? Evidence from the Regions," RBA Research Discussion Papers rdp2021-09, Reserve Bank of Australia.

    More about this item

    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:wly:quante:v:8:y:2017:i:2:p:611-650. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.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.