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The Ins and Outs of Unemployment in General Equilibrium

Author

Listed:
  • Nikolaos Kokonas

    (University of Bath)

  • Paulo Santos Monteiro

    (University of York)

Abstract

We develop a general equilibrium business cycle model of the labor market which is agnostic about the determinants of unemployment inflows and outflows. To close the model we impose a moving average representation for the Ins and Outs, obtained from a structural factor augmented vector autoregression model. By estimating the augmented DSGE model, we learn about the structural parameters and shocks contributing to the business cycle, without miss-specified dynamics for the unemployment inflows and outflows. Real wage rigidities are not found to be important. Participation is nearly acyclical, but flows across employment, unemployment and non-participation are strongly cyclical.

Suggested Citation

  • Nikolaos Kokonas & Paulo Santos Monteiro, 2020. "The Ins and Outs of Unemployment in General Equilibrium," Discussion Papers 2014, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:2014
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    Keywords

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    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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