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Matching efficiency and business cycle fluctuations

  • Francesco Furlanetto


    (Norges Bank (Central Bank of Norway))

  • Nicolas Groshenny


    (Reserve Bank of New Zealand)

A large decline in the e¢ ciency of the U.S. labor market in matching unemployed workers and vacant jobs has been documented during the Great Recession. We use a simple New Keynesian model with search and matching frictions in the labor market to study the propagation of matching e¢ ciency shocks. We show that the transmission of these disturbances and their importance for business cycle fluctuations depend crucially on the form of hiring costs and on the presence of nominal rigidities.

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Paper provided by Norges Bank in its series Working Paper with number 2012/07.

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Length: 34 pages
Date of creation: 30 Apr 2012
Date of revision:
Handle: RePEc:bno:worpap:2012_07
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