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Uncertainty shocks and labor market dynamics in Japan

Hiroaki Miyamoto

No SDES-2016-8, Working Papers from Kochi University of Technology, School of Economics and Management

Abstract: This paper examines the effects of uncertainty shocks on Japan’s labor market. Using a measure of uncertainty from the stock market data and a structural VAR model, I find that an increase in uncertainty leads to a rise in unemployment and declines in output, vacancies, and inflation. I then develop a dynamic general equilibrium model with labor market frictions and examine the transmission mechanism of uncertainty shocks. In the model, uncertainty shocks are defined as unexpected increases in the volatility of technology shock. My model can replicate the observed pattern of labor market responses to uncertainty shocks. I also discuss how the job separation channel influences the macroeconomic effect of uncertainty shocks.

Keywords: Uncertainty; Unemployment; Search and matching; Japanese economy (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2016-06, Revised 2016-06
New Economics Papers: this item is included in nep-dge and nep-mac
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Published in SDE Series, June 2016, pages 1-25

Downloads: (external link) First version, 2016 (application/pdf)

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