Mismatch Shocks and Unemployment During the Great Recession

Francesco Furlanetto and Nicolas Groshenny

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Abstract: Summary We investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium‐scale dynamic stochastic general equilibrium model with sticky prices and equilibrium search unemployment that features a shock to the matching efficiency (or mismatch shock). We find that this shock is not important for unemployment fluctuations in normal times. However, it plays a somewhat larger role during the Great Recession when it contributes to raise the actual unemployment rate by around 1.3 percentage points and the natural rate by around 2 percentage points. The mismatch shock is the dominant driver of the natural rate of unemployment and explains part of the recent shift of the Beveridge curve. Copyright © 2016 John Wiley & Sons, Ltd.

Date: 2016-11
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Published in Journal of Applied Econometrics, 2016, 31 (7), pp.1197-1214. ⟨10.1002/jae.2498⟩

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Related works:
Journal Article: Mismatch Shocks and Unemployment During the Great Recession (2016)
Working Paper: Mismatch Shocks and Unemployment During the Great Recession (2015)
Working Paper: Mismatch Shocks and Unemployment During the Great Recession (2015)
Working Paper: Mismatch Shocks and Unemployment During the Great Recession (2014)
Working Paper: Mismatch Shocks and Unemployment During the Great Recession (2014)
Working Paper: Mismatch shocks and unemployment during the Great Recession (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04204699

DOI: 10.1002/jae.2498

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