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Matching efficiency and business cycle fluctuations

A large decline in the efficiency of the US labour 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 labour 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 Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number DP2012/06.

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Length: 35 p.
Date of creation: Oct 2012
Date of revision:
Handle: RePEc:nzb:nzbdps:2012/06
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