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On unemployment cycles in the Euro Area, 1999–2018

Nikolaos Charalampidis

European Economic Review, 2020, vol. 121, issue C

Abstract: This paper studies the recurrent sources of unit-root unemployment fluctuations in Greece, Italy, Portugal, Spain, and the Euro Area by integrating wage markup and labor disutility shocks that exhibit permanent euro-area-wide shifts, country-specific trend developments, and stationary changes in an estimated DSGE model. In all economies, these labor market shocks account for a negligible share of unemployment cycles. Demand shocks explain about 40% of them, contribute to the pre-crisis convergence of unemployment rates, and shape the unemployment spikes during the Great Recession. Cross-country relative price distortions and supply factors account for about 40% and 20% of those cycles, respectively.

Keywords: Unemployment rate; Wage markup; Euro Area; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E32 E24 E52 F45 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.euroecorev.2019.103329

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