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News and Labor Market Dynamics in the Data and in Matching Models

  • Francesco Zanetti
  • Konstantinos Theodoridis

This paper uses a VAR model estimated with Bayesian methods to identify the effect of productivity news shocks on labor market variables by imposing that they are orthogonal to current technology but they explain future observed technology.� In the aftermath of a positive news shock, unemployment falls, whereas wages and the job finding rate increase.� The analysis establishes that news shocks are important in explaining the historical developments in labor market variables, whereas they play a minor role for movements in real activity.� We show that the empirical responses to news shocks are in line with those of a baseline search and matching model of the labor market and that the job destruction rate and real wage rigidities are critical for the variables' responses to the news shock.

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File URL: http://www.economics.ox.ac.uk/materials/papers/13253/paper699.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 699.

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Date of creation: 26 Feb 2014
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Handle: RePEc:oxf:wpaper:699
Contact details of provider: Postal: Manor Rd. Building, Oxford, OX1 3UQ
Web page: http://www.economics.ox.ac.uk/
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  13. Eric Leeper & Todd Walker, 2011. "Information Flows and News Driven Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(1), pages 55-71, January.
  14. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
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  17. Görtz, Christoph & Tsoukalas, John, 2011. "News and Financial Intermediation in Aggregate Fluctuations," MPRA Paper 34113, University Library of Munich, Germany, revised Oct 2011.
  18. Beaudry, Paul & Portier, Franck, 2001. "An Exploration into Pigou's Theory of Cycles," CEPR Discussion Papers 2996, C.E.P.R. Discussion Papers.
  19. Theodoridis, Konstantinos, 2011. "An efficient minimum distance estimator for DSGE models," Bank of England working papers 439, Bank of England.
  20. Kadiyala, K. Rao & Karlsson, Sune, 1994. "Numerical Aspects of Bayesian VAR-modeling," SSE/EFI Working Paper Series in Economics and Finance 12, Stockholm School of Economics.
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  23. Hashmat Khan & John Tsoukalas, 2009. "The Quantitative Importance of News Shocks in Estimated DSGE Models," Carleton Economic Papers 09-07, Carleton University, Department of Economics, revised 22 May 2012.
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  27. Schmitt-Grohé, Stephanie & Uribe, Martín, 2012. "What's News in Business Cycles," CEPR Discussion Papers 8984, C.E.P.R. Discussion Papers.
  28. di Pace, Federico & Faccini, Renato, 2010. "Deep habits and the cyclical behaviour of equilibrium unemployment and vacancies," Bank of England working papers 391, Bank of England.
  29. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
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  32. Haroon Mumtaz & Francesco Zanetti, 2012. "Neutral Technology Shocks And The Dynamics Of Labor Input: Results From An Agnostic Identification," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 235-254, 02.
  33. Stephanie Schmitt‐Grohé & Martín Uribe, 2012. "What's News in Business Cycles," Econometrica, Econometric Society, vol. 80(6), pages 2733-2764, November.
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