Supply shocks, demand shocks, and labor market fluctuations

Helge Braun, Reinout De Bock () and Riccardo DiCecio ()

Review, 2009, issue May, pages 155-178

Abstract: The authors use structural vector autoregressions to analyze the responses of worker flows, job flows, vacancies, and hours to demand and supply shocks. They identify these shocks by restricting the short-run responses of output and the price level. On the demand side, they disentangle a monetary and nonmonetary shock by restricting the response of the interest rate. The responses of labor market variables are similar across shocks: Expansionary shocks increase job creation, the job-finding rate, vacancies, and hours; and they decrease job destruction and the separation rate. Supply shocks have more persistent effects than demand shocks. Demand and supply shocks are equally important in driving business cycle fluctuations of labor market variables. The authors' findings for demand shocks are robust to alternative identification schemes involving the response of labor productivity at different horizons. Supply shocks identified by restricting productivity generate a higher fraction of impulse responses inconsistent with standard search and matching models.

Keywords: Labor supply; Labor market; Business cycles (search for similar items in EconPapers)
Date: 2009
View list of references

Downloads: (external link)
http://research.stlouisfed.org/publications/review/09/05/Braun.pdf (application/pdf)

Related works:
Working Paper: Supply shocks, demand shocks, and labor market fluctuations (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fip:fedlrv:y:2009:i:may:p:155-178:n:v.91no.3

Ordering information: This journal article can be ordered from
http://www.stls.frb. ... h/order/pubform.html

Access Statistics for this article

More articles in Review from Federal Reserve Bank of St. Louis
Contact information at EDIRC.
Series data maintained by Diane Rosenberger ().