Can animal spirits explain the dynamics of European unemployment?

Patrick Fève and Francois Langot

No 1996044, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: We estimate a model with equilibrium unemployment explained by a search process on the labor market. We find that the matching function has increasing returns to scale and we show that this model may display fluctuations at business cycle frequencies even when there are no shocks to the fundamentals of the economy. In particular, self-fulfilling beliefs, or "animal spirits", can explain the fluctuations around the Beveridge curve observed in the French, German and U.K. economies.

JEL-codes: C51 C52 E32 (search for similar items in EconPapers)
Pages: 30
Date: 1996-09-01
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Citations: View citations in EconPapers (1)

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