returns to scale in a matching model evidence from disaggregated panel data the returns to scale in the matching function play an important role in models with endogenous search effort due to positive externalities increasing returns to scale in matching can support high or low activity equilibrium in the labour market in this study we examine this issue using panel data from finnish employment offices the study finds that the results from the cobb douglas and translog specification are qualitatively different the cd specification of the matching function exhibits constant returns to scale the translog specification in turn exhibits increasing returns to scale the elasticity estimate for returns using the preferred specification and minimum and maximum sample values for job seekers and vacancies fall in the range of 1 1 to 1 6

non uniformity of job matching in a transition economy a nonparametric analysis for the czech republic this study explores the properties and development of the matching technology in the czech republic during the transition to a market economy nonparametric additive modelling allows us to assess flexible functional forms which comprise for instance ces and trans log specifications this enables us to evaluate the matching process locally for each combination of unemployment and vacancies rather than being restricted to global coefficients special interest is devoted to analysis and economic determinants of regional variation in the returns to scale of the matching function non linearities are found in the partial adjustment process of unemployment outflows and a negative coefficient on vacancies in some years moreover increasing returns to scale in job matching are found locally returns to scale are found to be negatively correlated to the share in employment in services and to outmigration positively correlated to the employment share in industry the unemployment rate and various measures of ac

scale effects in markets with search estimates of aggregate matching functions may miss important scale effects in frictional labour markets because of the reactions of job seekers to scale we estimate a semi structural model of search and matching on a british sample of unemployed people testing for scale effects on the probability of receiving an offer and on the distribution of wage offers we find them only in wage offers but we also find that reservation wages rise to deliver higher post unemployment wages but not faster matches so aggregate matching functions should be unaffected by scale but wage equations should be showing them

search intensity job advertising and efficiency this paper demonstrates that if both firms and workers search the other side of the market for job matches the equilibrium rate of unemployment is likely to be too high both sides ignore a positive externality of their search when they establish a job match they remove from the market a job searcher so they save society his search costs i show that there is no feasible wage rate that can internalize this externality under fairly weak restrictions on the technology of search

monetary policy rules work and discretion doesn t a tale of two eras this lecture examines monetary policy during the past three decades it documents two contrasting eras first a rules based era from 1985 to 2003 and second an ad hoc era from 2003 to the present during the rules based era monetary policy in broad terms followed a predictable systemic approach and economic performance was generally good during the ad hoc era monetary policy is best described as a discretion of authorities approach and economic performance was decidedly poor by considering alternative explanations of this policy performance correlation and examining corroborating evidence the paper concludes that rules based policies have clear advantages over discretion this abstract was borrowed from another version of this item

unemployment and market size without strong empirical support labour market matching models typically assume constant returns to scale in matching we construct a tractable equilibrium random matching model with a general matching technology introducing market size effects the job finding rate varies with unemployment stable steady states may occur in regions of increasing or decreasing returns and multiple equilibria are welfare ranked by market size while the standard model relies on high frequency shocks to the steady state to explain the co movement of unemployment and job finding locally decreasing returns in matching generate plausible adjustment dynamics and slower convergence lastly an extension of the hosios condition internalises search externalities

inflation forecast targeting an alternative approach to estimating the inflation output variability tradeoff we suggest a new way of computing the inflation output variability tradeoff under inflation forecast targeting our approach is based on dynamic stochastic simulations of the average inflation rate over a two year horizon using the moving average representation of a vector autoregressive var model using real time data over two samples we estimate the inflation output variability tradeoff for the united states and show that it has shifted favorably over time we analyze the policy interventions required to achieve target inflation in each sample and compare these interventions over time

is there compelling evidence against increasing returns to matching in the labour market matching models of the labour market have been of particular interest in macroeconomics where the notion of thick market externalities can lead to multiple equilibria this has led to some recent interest in constructing empirical estimates of labor market matching functions this paper argues that existing estimates do not provide compelling evidence against the hypothesis of increasing returns in matching the assumption made in several studies that the relevant pool of job searchers is proportional to the stock of unemployment is a potentially important source of downward bias in returns to scale estimates we show the source of this bias theoretically and illustrate its magnitude by estimating canadian aggregate and regional labour market matching functions over the period 1978 88 this evidence suggests significant increasing returns to labor market matching

marketplaces and matching this paper models equilibrium trading patterns when marketplaces exist and goods are differentiated when first visiting the market a buyer samples a stock of goods if fortunate the buyer matches with and purchases one of these goods and then exits the market if an initial match does not exist the buyer can now only match with the flow of new goods for sale the previous stock has been sampled and rejected in a steady state the current stock of unmatched traders on one side of the market is trying to match with the flow of new traders on the other side it is shown that this market behaviour describes matching patterns between unemployed job seekers and vacancies in uk job centres

output inflation and stabilization a counterfactual analysis abstract we estimate a small open economy macro model in which movements in inflation and output are driven by fiscal real monetary exchange rate and asset disturbances we use 1980 s data from bolivia and brazil each of which undertook stabilization programs though only bolivia s succeeded an important part of our analysis is counterfactual where hypothetical paths of output and inflation under alternative policymaking scenarios are investigated for bolivia there is clear evidence that deficits affect inflation largely through their effects on money growth and do not have much influence on output external shocks are important for brazilian inflation

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

costly search and recruiting a labor market model with costly search and recruiting is constructed it incorporates many features found in other models and provides new insights into the effects of externalities and transaction costs the model possesses a continuum of equilibria some of which may be pareto ranked with different rates of unemployment despite the multiplicity of equilibria comparative statics results are obtained copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

returns to scale in a matching model of the labor market abstract this paper presents evidence on the degree of returns to scale in the labor market using a transcendental logarithmic model of the labor market matching technology the empirical results imply locally increasing returns to scale and are consistent with multiple equilibria thereby suggesting a potentially welfare enhancing role for macroeconomic policy intervention

rational expectations business cycles in search equilibrium we examine the rational expectations equilibrium paths of the model of search and barter in diamond s aggregate demand management in search equilibrium for some initial positions there are two equilibrium paths converging to different steady states with the high activity path pareto dominating the low activity path with some parameters there is also a continuum of equilibrium paths converging to another steady state moreover there can be cycles that are equilibrium paths even though the environment is stationary

monetary policy and the global housing bubble what caused the housing boom of the 2000s a number of researchers have suggested that loose monetary policy during the first half of the 2000s was a primary cause of the substantial run up in house prices in many countries however using a common statistical approach we find that monetary policy was not the main factor that should not be surprising although low interest rates raise house prices the increase in prices during the mid 2000s was much larger than the historical relationship between the two variables would suggest instead we investigate further the link between the marked loosening in terms and standards for mortgage credit and the most rapid increases in house prices this link provides some evidence for a story where credit provision and the demand for housing fed on each other and helped spur the housing boom our work suggests a greater role for macroprudential regulation rather than monetary policy in managing asset price booms jane dokko brian m doyle michael t kiley jinill kim shane sherlund jae sim and skander van den heuvel

level of aggregation variable elasticity and wagner s law abstract this paper contends that income elasticities of all types of u s government expenditures but one are constant and less than unity the u s non defense government expenditure is the only one that supports wagner s law as it suggests this expenditure grows faster than income

data revisions and the identification of monetary policy shocks abstract monetary policy research using time series methods has been criticized for using more information than the federal reserve had available to quantify the role of this criticism we estimate vars with real time data while accounting for the latent nature of many economic variables such as output our estimated monetary policy shocks are closely correlated with typically estimated measures the impulse response functions are broadly similar across estimation methods our evidence suggests that the use of revised data in var analyses of monetary policy shocks may not be a serious limitation for recursively identified systems but presents more challenges for simultaneous systems

bernanke versus taylor a post mortem our analysis sheds light on the issue of whether the monetary policy contributed to the recent housing boom and bust we have estimated and analysed a model that allows a comparison between the actual policy and several alternative taylor rules when the taylor rule path was computed using revised data and the deflator for the gdp we found a notable impact on key housing market variables supporting taylor s critique of the fed policy however the bulk of our evidence suggests that the policy as it would have been conducted under our real time taylor rules would not have had any significant impact on the housing market variables this conclusion is robust with regard to the price index used as well as the relative weights used on the inflation and output gaps

monetary policy and indeterminacy after the 2001 slump abstract this paper estimates a simple new keynesian model of the u s economy allowing for indeterminacy over the period following the 2001 slump an episode for which the adequacy of monetary policy is intensely debated we find that only when measuring inflation with core pce does monetary policy appear to have been sufficiently active to rule out indeterminacy we then relax the assumption that inflation in the model is measured by a single indicator and re formulate the artificial economy as a factor model where the theory s concept of inflation is the common factor to the empirical inflation series cpi and pce provide better indicators of the latent concept while core pce is less informative finally we estimate an extended economy that distinguishes between core and headline inflation rates this model comfortably rules out indeterminacy and confirms the view that the federal reserve put more weight on core pce inflation when setting the policy rate during this period

matching finding a partner for life or otherwise how do job worker and husband wife relationships form and why do some matched pairs subsequently separate economists and game theorists are in the process of developing and applying an equilibrium explanation of match formation and separation based on the principle of voluntary pairing under competitive conditions the purpose of this paper is to assess the current state of these developments the general existence of patnership structures with the property that no one has an incentive to separate has been established these equilibrium structures maximize aggregate value over the set of all feasible match structures in the transferable utility case according to this pure theory of matching competition for partners can be expected to yield equilibrium match structures that are both stable and socially efficient at least under conditions of frictionless certainty search theoretic models that take account of meeting costs and initial uncertainty about match values have been developed to explain sepa