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A Structural Analysis of Unemployment-Generating Supply Shocks with an Application to the US Pharmaceutical Industry

Author

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  • Sara Boni

    (Free University of Bozen-Bolzano, Italy)

  • Francesco Ravazzolo

    (Free University of Bozen-Bolzano, Italy; BI Norwegian Business School, Norway)

Abstract

This paper aims to analyze unemployment-generating supply shocks. It proposes a structural vector autoregressive model estimated via a newly assembled identification scheme that relies on a minimum set of sign restrictions dictated by economic the- ory and recent market developments. We show that unemployment-generating supply shocks coexist with standard supply, demand, financial, and investment shocks, and we assess their impact on different macroeconomic variables. An application to the US pharmaceutical industry finds that the supply shock caused by Covid-19 in the sector is one of a kind. Particularly, the newly identified shock increases industrial production while decreasing the unemployment rate and producer prices in the US pharmaceutical industry.

Suggested Citation

  • Sara Boni & Francesco Ravazzolo, 2022. "A Structural Analysis of Unemployment-Generating Supply Shocks with an Application to the US Pharmaceutical Industry," BEMPS - Bozen Economics & Management Paper Series BEMPS94, Faculty of Economics and Management at the Free University of Bozen.
    • Handle: RePEc:bzn:wpaper:bemps94
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    More about this item

    Keywords

    Supply Shock; SVAR; Pharmaceutical Industry; Macroeconomic Policy; Unemployment.;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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