Mismatch Shocks and Unemployment During the Great Recession

Francesco Furlanetto and Nicolas Groshenny

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: 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 DSGE 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.

Keywords: Search and matching frictions; unemployment; natural rates (search for similar items in EconPapers)
JEL-codes: C51 C52 E32 (search for similar items in EconPapers)
Pages: 103 pages
Date: 2014-08
New Economics Papers: this item is included in nep-dge, nep-ger, nep-lab and nep-mac
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Citations: View citations in EconPapers (3)

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https://cama.crawford.anu.edu.au/sites/default/fil ... anetto_groshenny.pdf (application/pdf)

Related works:
Journal Article: Mismatch Shocks and Unemployment During the Great Recession (2016)
Working Paper: 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 (2013)
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