Fast Rises, Slow Declines: Asymmetric Unemployment Dynamics with Matching Frictions

Domenico Ferraro

Journal of Money, Credit and Banking, 2023, vol. 55, issue 2-3, 349-378

Abstract: I argue that the textbook search‐and‐matching model cannot generate the observed cyclical asymmetry in the unemployment rate. In the United States, the unemployment rate rises quickly and abruptly at the onset of recessions and declines slowly and gradually during expansions. This pattern produces positive skewness in the distribution of unemployment rate changes, while the model generates a counterfactually negative skewness. Moreover, I show that the model's inability to replicate the cyclical asymmetry in the data stands regardless of its ability to generate realistic volatility in unemployment rate fluctuations.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:55:y:2023:i:2-3:p:349-378

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