The ins and outs of unemployment in general equilibrium.

TY - UNPB

T1 - The ins and outs of unemployment in general equilibrium.

AU - Santos Monteiro, Paulo

AU - Kokonas, Nikolaos

PY - 2020

Y1 - 2020

N2 - We develop a general equilibrium business cycle model of the labor market which is agnostic about the determinants of unemployment inflows and outflows. To close the model we impose a moving average representation for the Ins and Outs, obtained from a structural factor augmented vector autoregression model. By estimating the augmented DSGE model, we learn about the structural parameters and shocks contributing to the business cycle, without miss-specified dynamics for the unemployment inflows and outflows. Real wage rigidities are not found to be important. Participation is nearly acyclical, but flows across employment, unemployment and non-participation are strongly cyclical.

AB - We develop a general equilibrium business cycle model of the labor market which is agnostic about the determinants of unemployment inflows and outflows. To close the model we impose a moving average representation for the Ins and Outs, obtained from a structural factor augmented vector autoregression model. By estimating the augmented DSGE model, we learn about the structural parameters and shocks contributing to the business cycle, without miss-specified dynamics for the unemployment inflows and outflows. Real wage rigidities are not found to be important. Participation is nearly acyclical, but flows across employment, unemployment and non-participation are strongly cyclical.

M3 - Working paper

T3 - Centre for Macroeconomics

SP - 56

BT - The ins and outs of unemployment in general equilibrium.

ER -