Migration and Business Cycle Dynamics

Christie Smith (christierbnz@yahoo.com) and Christoph Thoenissen

No 2018006, Working Papers from The University of Sheffield, Department of Economics

Abstract: Shocks to net migration matter for the business cycles. Using an estimated dynamic stochastic general equilibrium (DSGE) model of a small open economy and a structural vector autoregression, we find that migration shocks account for a considerable proportion of the variability of per capita GDP. Migration shocks matter for the capital investment and consumption components of per capita GDP, but they are not the most important driver. Migration shocks are also important for residential investment and real house prices, but other shocks play a larger role in driving housing market volatility. In the DSGE model, the level of human capital possessed by migrants relative to that of locals materially affects the business cycle impact of migration. The impact of migration shocks is larger when migrants have substantially different levels of human capital relative to locals. When the average migrant has higher levels of human capital than locals, as seems to be common in most OECD economies, a migration shock has an expansionary effect on per capita GDP and its components.

Keywords: Migration; macroeconomics; business cycle fluctuations (search for similar items in EconPapers)
JEL-codes: E44 E61 F42 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2018-06
New Economics Papers: this item is included in nep-dge, nep-mac, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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http://www.sheffield.ac.uk/economics/research/serps/articles/2018_006 First version, May 2018 (application/pdf)

Related works:
Working Paper: Migration and business cycle dynamics (2018)
Working Paper: Migration and Business Cycle Dynamics (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2018006

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