Uncertainty shocks and unemployment dynamics

Malak Kandoussi and Francois Langot

Economics Letters, 2022, vol. 219, issue C

Abstract: Recent events suggest that uncertainty changes play a major role in U.S. labor market fluctuations. This study analyzes the impact of uncertainty shocks on unemployment dynamics. We develop a quantitative version of the Diamond–Mortensen–Pissarides (DMP) model, in which uncertainty shocks hit the economy. Given the significant nonlinearities of the DMP model, we show that the introduction of uncertainty shocks allows this textbook model to account for observed characteristics of the U.S. labor market dynamics, with reasonable values for calibrated parameters.

Keywords: Uncertainty shocks; Unemployment dynamics; Search and matching; Non-linearities (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Uncertainty shocks and unemployment dynamics (2022)
Working Paper: Uncertainty Shocks and Unemployment Dynamics (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:219:y:2022:i:c:s0165176522002725

DOI: 10.1016/j.econlet.2022.110760

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