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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. 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).
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  3. Ramey, Garey & Fujita, Shigeru, 2006. "Job Matching and Propagation," University of California at San Diego, Economics Working Paper Series qt53s671h7, Department of Economics, UC San Diego.
  4. Petrosky-Nadeau, Nicolas & Wasmer, Etienne, 2010. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," IZA Discussion Papers 5131, Institute for the Study of Labor (IZA).
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  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.
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  12. James S. Costain & Michael Reiter, 2003. "Business Cycles, Unemployment Insurance, and the Calibration of Matching Models," CESifo Working Paper Series 1008, CESifo Group Munich.
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  15. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  16. 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.
  17. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  18. 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.
  19. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October.
  20. 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.
  21. 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.
  22. Murat Tasci, 2007. "On-the-job search and labor market reallocation," Working Paper 0725, Federal Reserve Bank of Cleveland.
  23. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
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