 Labour at riskVasco Botelho, Claudia Foroni and Andrea Renzetti European Economic Review, 2024, vol. 170, issue C Abstract: We propose a Bayesian VAR model with stochastic volatility and time varying skewness to estimate the degree of labour at risk in the euro area and in the United States. We model the asymmetry of the shocks to changes in the unemployment rate as a function of real activity and financial risk factors. We find that the conditional distribution of the changes in the unemployment rate displays time-varying volatility and skewness, with peaks coinciding with the Global Financial Crisis and the COVID-19 pandemic, in both areas. We also take advantage of the multivariate nature of our parametric model to measure the joint risk of large increases in the unemployment rate together with large annual rates of inflation, a proxy for “stagflation” risks. The model captures an increase of the risk of stagflation with the surge in inflation that followed the recent energy crisis in 2022. Nevertheless, stagflation risks were contained by the resilient performance of the labour market in both areas. Labour at risk is therefore important for the assessment of the inflation-unemployment trade-off. Keywords: Unemployment risk; Stagflation risk; Labour market; Bayesian econometrics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:170:y:2024:i:c:s0014292124001788 DOI: 10.1016/j.euroecorev.2024.104849 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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