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The Cyclical Behavior of Equilibrium Unemployment and Vacancies Across OECD Countries

  • Murat Tasci

    (Federal Reserve Bank of Cleveland)

  • Pedro Amaral

    (Federal Reserve Bank of Cleveland)

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 -- the volatility puzzle is ubiquitous. We also argue that using cross-country data is helpful in evaluating the relative merits of the model alternatives that have appeared in the literature. In illustrating this point, we take the solution proposed in Hagedorn and Manovskii (2008) and show that it continues to predict counterfactually low volatility in labor market variables for countries that exhibit sufficiently low persistence in their estimated productivity processes.

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Paper provided by Society for Economic Dynamics in its series 2013 Meeting Papers with number 450.

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Date of creation: 2013
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Handle: RePEc:red:sed013:450
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  18. 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.
  19. 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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