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Fiscal Stimulus and Unemployment Dynamics

Chun-Hung Kuo and Hiroaki Miyamoto

No SDES-2015-10, Working Papers from Kochi University of Technology, School of Economics and Management

Abstract: Focusing on both hiring and firing margins, this paper revisits effects of fiscal expansion on unemployment. We develop a DSGE model with search frictions where job separation is endogenously determined. The predictions of the model are in contrast with earlier studies that assume exogenous separation. Our model can capture the empirical pattern of responses of the job finding, separation, and unemployment rates to a government spending shock, obtained from estimating a structural VAR model with the U.S. data. However, our model fails to capture the response of vacancies and the volatility of unemployment.

Keywords: Fiscal Policy; Unemployment; Labor market; Search and matching; Endogenous separation (search for similar items in EconPapers)
JEL-codes: E24 E62 J64 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-01, Revised 2015-01
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Published in SDE Series, January 2015, pages 1-30

Downloads: (external link)
http://www.souken.kochi-tech.ac.jp/seido/wp/SDES-2015-10.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Fiscal stimulus and unemployment dynamics (2019) Downloads
Working Paper: Fiscal Stimulus and Unemployment Dynamics (2014) Downloads
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