The Ins and Outs of Unemployment in General Equilibrium

Nikolaos Kokonas (n.kokonas@bath.ac.uk) and Paulo Santos Monteiro
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Nikolaos Kokonas: University of Bath

No 2014, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: We develop a general equilibrium business cycle model of the labor market which is agnostic about the determinants of unemployment inflows and outflows. To close the model we impose a moving average representation for the Ins and Outs, obtained from a structural factor augmented vector autoregression model. By estimating the augmented DSGE model, we learn about the structural parameters and shocks contributing to the business cycle, without miss-specified dynamics for the unemployment inflows and outflows. Real wage rigidities are not found to be important. Participation is nearly acyclical, but flows across employment, unemployment and non-participation are strongly cyclical.

Keywords: unemployment inflows and outflows; labor market; business cycles (search for similar items in EconPapers)
JEL-codes: C50 E24 E32 J22 J64 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2020-05
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