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Stochastic Volatility in the U.S. Labor Market

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  • Dennis, Wesselbaum

Abstract

In state-of-the-art macroeconomic and labor market models shocks are assumed to be homoscedastic. However, we show that this assumption is much too restrictive. We �find signifi�cant evidence for strong time-varying volatility in all considered labor market time series. First, we estimate the unconditional variance-covariance matrix and �find signi�cant evidence for time variability. Second, we estimate the conditional variance-covariance matrix and discuss the time-varying risk contained in labor market variables. The implications are relevant for modelling purposes, welfare analysis, and the understanding of sources of fl�uctuations.

Suggested Citation

  • Dennis, Wesselbaum, 2012. "Stochastic Volatility in the U.S. Labor Market," MPRA Paper 43054, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:43054
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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