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A mixed frequency BVAR for the euro area labour market

Agostino Consolo, Claudia Foroni and Catalina Martínez Hernández

No 2601, Working Paper Series from European Central Bank

Abstract: We introduce a Bayesian Mixed-Frequency VAR model for the aggregate euro area labour market that features a structural identification via sign restrictions. The purpose of this paper is twofold: we aim at (i) providing reliable and timely forecasts of key labour market variables and (ii) enhancing the economic interpretation of the main movements in the labour market. We find satisfactory results in terms of forecasting, especially when looking at quarterly variables, such as employment growth and the job finding rate. Furthermore, we look into the shocks that drove the labour market and macroeconomic dynamics from 2002 to early 2020, with a first insight also on the COVID-19 recession. While domestic and foreign demand shocks were the main drivers during the Global Financial Crisis, aggregate supply conditions and labour supply factors reflecting the degree of lockdown-related restrictions have been important drivers of key labour market variables during the pandemic. JEL Classification: J6, C53, C32, C11

Keywords: Bayesian VAR; labour market; mixed frequency data (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-eec, nep-ets, nep-lab and nep-mac
Note: 3572376
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