Stochastic Volatility in the U.S. Labor Market

Dennis Wesselbaum

MPRA Paper from University Library of Munich, Germany

Abstract: In state-of-the-art macroeconomic and labor market models shocks are assumed to be homoscedastic. However, we show that this assumption is much too restrictive. We �find signifi�cant evidence for strong time-varying volatility in all considered labor market time series. First, we estimate the unconditional variance-covariance matrix and �find signi�cant evidence for time variability. Second, we estimate the conditional variance-covariance matrix and discuss the time-varying risk contained in labor market variables. The implications are relevant for modelling purposes, welfare analysis, and the understanding of sources of fl�uctuations.

Keywords: Dynamic Correlation; Multivariate GARCH; Stochastic Volatility (search for similar items in EconPapers)
JEL-codes: C30 E30 J60 (search for similar items in EconPapers)
Date: 2012-11-29
New Economics Papers: this item is included in nep-lab, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43054

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