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Matching efficiency and business cycle fluctuations

  • Francesco Furlanetto


  • Nicolas Groshenny


A large decline in the efficiency of the US 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 macroeconomic implications of matching efficiency shocks. We show that the propagation 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 Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2012-34.

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Length: 35 pages
Date of creation: Jul 2012
Date of revision:
Handle: RePEc:een:camaaa:2012-34
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