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A Stock-Flow Accounting Model of the Labor Market: An Application to Israel

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  • Yossi Yakhin
  • Natalya Presman

Abstract

The paper utilizes a theoretical stock-flow accounting model of the labor market, similar to Blanchard and Diamond (1989). Identifying restrictions are derived from the theoretical model and are imposed on a SVAR system. The estimation allows for decomposing fluctuations to their cyclical and structural components. The model is applied to the Israeli economy. The estimates suggest that non-cyclical factors account for at least half of the decline of the unemployment rate during the period between 2004-Q1, when unemployment peaked at 10.9 percent, and 2011-Q4, when it marked a trough at 5.4 percent; suggesting a shift inward of the Beveridge curve.

Suggested Citation

  • Yossi Yakhin & Natalya Presman, 2015. "A Stock-Flow Accounting Model of the Labor Market: An Application to Israel," IMF Working Papers 2015/058, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/058
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    References listed on IDEAS

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    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Renée Fry & Adrian Pagan, 2011. "Sign Restrictions in Structural Vector Autoregressions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 938-960, December.
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    7. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
    8. Howard J. Wall & Gylfi Zoega, 2002. "The British Beveridge curve: A tale of ten regions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 257-276, July.
    9. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
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    13. Wall, Howard J & Zoega, Gylfi, 2002. "The British Beveridge Curve: A Tale of Ten Regions," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(3), pages 261-280, July.
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    Cited by:

    1. Predrag Trpeski & Verica Janeska & Marijana Cvetanoska & Aleksandra Lozanoska, 2017. "Unemployment and a Stock – Flow Model on the Labour Market in the Republic of Macedonia," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 41-63.

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    More about this item

    Keywords

    WP; Structural unemployment; Beveridge curve; SVAR with sign restrictions; result unemployment; beneits result; unemployment rise; unemployment variation; time series; vacancies in response; job destruction parameter; Unemployment; Labor force; Labor supply; Unemployment rate; Labor markets; Global;
    All these keywords.

    JEL classification:

    • 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
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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