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The cyclical behavior of equilibrium unemployment and vacancies across OECD countries

  • Pedro S. Amaral
  • Murat Tasci

We show that the inability of a standardly-calibrated stochastic labor search-and-matching model to account for the observed volatility of unemployment and vacancies extends beyond U.S. data to a set of OECD countries. We also argue that using cross-country data is helpful in evaluating the relative merits of the alternatives that have appeared in the literature. In illustrating this point, we take the solution proposed in Hagedorn and Manovskii (2008) and show that its ability to match the labor market volatility magnitudes seen in the data depends crucially on how persistent the estimated productivity process is.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 1236.

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Date of creation: 2012
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Handle: RePEc:fip:fedcwp:1236
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  1. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  2. Manuel Toledo & Jose I. Silva, 2005. "Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment," 2005 Meeting Papers 775, Society for Economic Dynamics.
  3. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  4. James S. Costain & Michael Reiter, 2003. "Business Cycles, Unemployment Insurance, and the Calibration of Matching Models," CESifo Working Paper Series 1008, CESifo Group Munich.
  5. Shigeru Fugita & Garey Ramey, 2006. "Job matching and propagation," Working Papers 06-13, Federal Reserve Bank of Philadelphia.
  6. Peter Whiteford, 1995. "The Use of Replacement Rates in International Comparisons of Benefit Systems," Discussion Papers 0054, University of New South Wales, Social Policy Research Centre.
  7. Nicolas Petrosky-Nadeau & Etienne Wasmer, 2013. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(1), pages 193-221, January.
  8. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  9. Lee E. Ohanian & Andrea Raffo, 2011. "Aggregate Hours Worked in OECD Countries: New Measurement and Implications for Business Cycles," NBER Working Papers 17420, National Bureau of Economic Research, Inc.
  10. Mortensen, Dale T. & Nagypál, Éva, 2005. "More on Unemployment and Vacancy Fluctuations," IZA Discussion Papers 1765, Institute for the Study of Labor (IZA).
  11. John Kennan, 2005. "Private Information, Wage Bargaining and Employment Fluctuations," 2005 Meeting Papers 555, Society for Economic Dynamics.
  12. Robert Shimer, 2004. "The Consequences of Rigid Wages in Search Models," NBER Working Papers 10326, National Bureau of Economic Research, Inc.
  13. Murat Tasci, 2007. "On-the-job search and labor market reallocation," Working Paper 0725, Federal Reserve Bank of Cleveland.
  14. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Julen ESTEBAN-PRETEL & NAKAJIMA Ryo & TANAKA Ryuichi, 2011. "Japan's Labor Market Cyclicality and the Volatility Puzzle," Discussion papers 11040, Research Institute of Economy, Trade and Industry (RIETI).
  16. van Ours, J.C. & Ridder, G., 1992. "Vacancies and recruitment of new employees," Other publications TiSEM 9acc708a-0885-46a2-aef5-7, Tilburg University, School of Economics and Management.
  17. Krause, Michael U. & Lubik, Thomas A., 2006. "The cyclical upgrading of labor and on-the-job search," Labour Economics, Elsevier, vol. 13(4), pages 459-477, August.
  18. Hiroaki Miyamoto, 2009. "Cyclical Behavior of Unemployment and Job Vacancies in Japan," Working Papers EMS_2009_17, Research Institute, International University of Japan.
  19. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  20. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
  21. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  22. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  23. van Ours, Jan & Ridder, Geert, 1992. "Vacancies and the Recruitment of New Employees," Journal of Labor Economics, University of Chicago Press, vol. 10(2), pages 138-55, April.
  24. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
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