bank spread with uncertain deposit level and risk aversion abstract this paper derives a model of the banking firm under uncertainty and risk aversion the selection of the bank s optimal spread between loan and deposit rates is emphasized the model s results provide some implications for bank asset quality capital regulation and deposit insurance for example it is shown that increases in the level of equity capital tend to increase the bank s spread under dara this implies an improvement in bank asset quality on the other hand as the deposit supply function becomes more volatile the bank s spread narrows which implies a decline in the quality of the bank s assets

the american business cycle continuity and change in recent decades the american economy has experienced the worst peace time inflation in its history and the highest unemployment rate since the great depression these circumstances have prompted renewed interest in the concept of business cycles which joseph schumpeter suggested are like the beat of the heart of the essence of the organism that displays them in the american business cycle some of the most prominent macroeconomics in the united states focuses on the questions to what extent are business cycles propelled by external shocks how have post 1946 cycles differed from earlier cycles and what are the major factors that contribute to business cycles they extend their investigation in some areas as far back as 1875 to afford a deeper understanding of both economic history and the most recent economic fluctuations seven papers address specific aspects of economic activity consumption investment inventory change fiscal policy monetary behavior open economy and the labor market five papers focus on aggregate economic activity in a number of cases the papers present findings that challenge widely accepted models and assumptions in addition to its substantive findings the american business cycle includes an appendix containing both the first published history of the nber business cycle dating chronology and many previously unpublished historical data series

the brevity and violence of contractions and expansions abstract early studies of business cycles argued that contractions in economic activity were briefer shorter and more violent rapid than expansions this paper systematically investigates this claim and in the process discovers a robust new business cycle fact contractions in employment are briefer and more violent than expansions but we cannot reject the null of equal brevity and violence for expansions and contractions in output the difference arises because employment typically lags output around peaks but they coincide in their troughs we discuss the performance of existing business cycle models in accounting for this fact and conclude that none can fully account for it we then show that a business cycle model with asymmetric adjustment costs on employment and a choice of when to scrap old technologies can account for the business cycle fact both qualitatively and quantitatively

the ins and outs of european unemployment in this paper we study the contribution of inflows and outflows to the dynamics of unemployment in three european countries the united kingdom france and spain all countries are interesting in their own right and in the comparison with each other britain s labour markets were strictly regulated up to the mid 1980s but they have been liberalized since then france is still a regulated economy compared with britain with unemployment averaging about 8 spain has had the biggest rise in unemployment in europe reaching 24 in the mid 1990s but policy reforms and fast growth since then brought it down to a level below france s we compare performance in these three countries making use of both administrative and labor force survey data we find that the impact of the 1980s reforms in britain is evident in the contributions of the inflow and outflow rates the inflow rate became a bigger contributor after the mid 1980s although its significance subsided again in the late 1990s and 2000s in france the dynamics of unemployment are driven by the outflow rate virtually entirely which is consistent with a regime with strict employment protection legislation in spain however both rates contribute significantly to the dynamics perhaps as a consequence of the prominence of fixed term contracts since the late 1980s

labor market and financial shocks a time varying analysis motivated by the events of the great recession we estimate a time varying structural var model to analyze the effects of a financial shock on the labor market focusing on the us our results indicate that a tightening of financial conditions is highly detrimental to the labor market moreover we show that financial shocks have affected the unemployment rate asymmetrically in the last three decades an implication that a standard var cannot capture while negative financial shocks have been responsible for increases in unemployment our model does not find significant contributions of financial shocks during periods of expansion the source of this asymmetry is the time varying standard deviation of the identified shock which is higher in times of financial distress on the other hand we find the transmission mechanism is almost constant over time

the ins and outs of uk unemployment this study shows that in the uk increases in unemployment in a recession are driven by rises in the separation rate a new decomposition of unemployment dynamics is devised that does not require unemployment to be in steady state at all times this is important because low uk transition rates one quarter the size of the us imply substantial deviation of unemployment from steady state near cyclical turning points in periods of moderation the job finding rate is shown to have most influence on uk unemployment dynamics evidence comes from the first study of monthly data derived from individuals labour market spells recorded in the british household panel survey from 1988 to 2008

deregulation shock in product market and unemployment in a dynamic general equilibrium model with endogenous markups and labor market frictions we investigate the effects of increased product market competition unlike most macroeconomic models of search we endogenize the labor supply along the extensive margin we find numerically that a model with endogenous labor force participation decision produces a decline in the unemployment rate which is almost three times larger than that in a model with fixed labor force for a calibration capturing alternatively the european and the us labor markets a deregulation episode which lowers the markup by 3 percentage points results in a fall in the unemployment rate by 0 17 and 0 05 percentage point respectively while the labor share is almost unaffected in the long run the sensitivity analysis reveals that product market deregulation is more effective in countries where product and labor market regulations are high unemployment benefits are small and labor force is more responsive

ricardo s international trade theory beyond the comparative cost example that the labour embodied in the export goods given in exchange for one unit of the imported good is less than the labour which the country would have to utilise if it itself were to produce one unit of the imported good there is no question that this ricardian model based on the example of england and portugal trading cloth for wine in chapter 7 of ricardo s principles of political economy and taxation 1951a is an excellent pedagogical device to illustrate the role of compara tive advantage in determining a country s trade pattern and the resulting gains from trade ricardo showed that trade enhances a country s welfare even though it may be more efficient than its trading partner in producing each of its commodities as long as its relative productivity advantage differs between them the principle of comparative advantage

relative productivity and search unemployment in an open economy abstract using a panel of eighteen oecd countries we find empirically that the long run effects of higher productivity of tradables relative to non tradables vary across time space and stages of the business cycle more specifically our evidence reveals that elasticities of the relative wage and relative price of non tradables with respect to relative productivity of tradables increase over time our estimates also show that the fall in the relative wage is more pronounced whilst the appreciation in the relative price is less in countries where labor markets are more regulated and during periods of recession to rationalize the evidence we differentiate between labor mobility costs caused by job search efforts and hiring costs resulting from search frictions in the labor market in a two sector open economy model while time declining labor mobility costs can account for the time increasing effects of a productivity differential international differences in labor market regulation and variations of hiring costs across the business cycle respectively can rationalize the cross country and state dependent effects we estimate empirically finally labor market frictions have important implications for sectoral unemployment since labor mobility and hiring costs bias labor demand toward the traded sector which results in a greater decline in unemployment in tradables relative to unemployment in non tradables following higher relative productivity

the cyclicality of labor market flows a multiple shock approach abstract in this paper we aim to establish some stylized facts about the relative contributions of the job finding and separation rates to unemployment dynamics depending on the nature of structural shocks the shocks in our bayesian structural var model are identified using a sign restriction approach and capture shifts in the three conditions determining labor market equilibrium in matching models the beveridge curve and the job creation and job destruction conditions using both us and french data we identify an aggregate shock to match profitability the aggregate profitability shock a shock specific to existing jobs the reallocation shock and a shock to the efficiency of the matching process the matching efficiency shock we find that the relative contributions of the job finding and separation rates are notably different across shocks in both countries but are similar across countries for each type of shock labor market dynamics appear to be transatlantic despite well known institutional differences however it must be emphasized that the reaction of the labor market variables to the matching efficiency shock seems more muted in the us than in france

the general equilibrium impacts of unemployment insurance evidence from a large online job board abstract during the great recession u s unemployment benefits were extended by up to 73 weeks theory predicts that extensions increase unemployment by discouraging job search a partial equilibrium effect using data from the large job board careerbuilder com i find that a 10 increase in benefit duration decreased state level job applications by 1 but had no robust effect on job vacancies job seekers thus faced reduced competition for jobs a general equilibrium effect calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 39

uncertainty driven labor market fluctuations abstract this paper explores uncertainty shocks as a driving force in a search and matching model of the labor market uncertainty takes the form of a noisy component in a firm s initial signal about job productivity greater uncertainty dampens job creation by increasing the risk of making the costly mistake of investing in jobs that will turn out to be unprofitable thus uncertainty shocks can cause labor market downturns lower vacancy rates lower job finding rates and higher unemployment numerical simulations examine the level of volatility and the cross correlations and autocorrelations of key u s labor market indicators that result from fluctuations driven by changes in uncertainty

the cyclicality of separation and job finding rates this paper uses cps gross flow data to analyze the business cycle dynamics of separation and job finding rates and to quantify their contributions to overall unemployment variability cyclical changes in the separation rate are negatively correlated with changes in productivity and move contemporaneously with them while the job finding rate is positively correlated with and tends to lag productivity contemporaneous fluctuations in the separation rate explain between 40 and 50 percent of fluctuations in unemployment depending on how the data are detrended this figure becomes larger when dynamic interactions between the separation and job finding rates are considered

financial innovation the discovery of risk and the u s credit crisis abstract financial innovation and overconfidence about the risk of new financial products were key factors behind the 2008 u s credit crisis we show that a model with a collateral constraint in which learning about the risk of a new financial environment interacts with fisherian amplification produces a boom bust cycle in debt asset prices and consumption early realizations of a high borrowing ability regime turn agents optimistic about the persistence probability of this regime conversely the first realization of a low borrowing ability regime turns agents unduly pessimistic the model predicts large increases in household debt land prices and excess returns during 1998 2006 followed by a collapse

forecasting unemployment across countries the ins and outs abstract this paper evaluates the flow approach to unemployment forecasting proposed by barnichon and nekarda 2012 for a set of oecd countries characterized by very different labor markets we find that the flow approach yields substantial improvements in forecast accuracy over professional forecasts for all countries with especially large improvements at longer horizons one year ahead forecasts for european countries moreover the flow approach has the highest predictive ability during recessions and turning points when unemployment forecasts are most valuable

systemic risk in banking networks advantages of tiered banking systems abstract this paper studies the risk and potential impact of system wide defaults in a tiered banking network where a small group of head institutions has many credit linkages with other banks while the majority of banks have only a few links a network is random and displays a given distribution of the number of banks linkages known as degree we model tiering by a negative correlation between degrees of neighboring banks and by a scale free degree distribution the main findings of the paper highlight the advantages of tiering both the risk of systemic crisis and the potential scope of the crisis are lower in systems with negative correlation of bank degrees than in other types of systems similarly in scale free networks the resilience of the system to shocks is increasing with the level of tiering

time variation in the dynamics of worker flows evidence from north america and europe vector autoregressive methods have been used to model the interrelationships between job vacancy rates job separation rates and job finding rates using tools such as impulse response analysis we investigate whether such impulse responses change across the business cycle or over time by estimating time varying parameter vector autoregressions for data from north america the usa and canada and europe france spain and the uk while the adjustment process of the labour market to shocks in canada and the usa is similar we find the adjustment process differs much more across the european countries with greater persistence in shocks relative to the usa and canada

job matching and propagation in the u s labor market the vacancy unemployment ratio and employment react sluggishly to productivity shocks we show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics creation costs induce entrant firms to smooth the adjustment of new openings following a shock leading the stock of vacancies to react sluggishly

north south trade and capital flows in a ricardian model of accumulation abstract a class based asymmetric general equilibrium model of the world economy is developed to trace the trajectory of the north south terms of trade the world profit rate the northern real wage and the level of southern employment in the presence of capital accumulation and technical progress it is shown that i accumulation must be accompanied by a continuing deterioration in the terms of trade of the south and may entail a cumulative contraction in its level of employment and ii technical progress in the south will of necessity produce a long run worsening of its terms of trade and assuming world demand for southern goods is priceinelastic of its level of unemployment

financial innovation systematic risk and commercial banks stability in china theory and evidence abstractwe are dedicated to revealing the impacts of financial innovation and systematic risk on commercial banks stability in china both theoretically and empirically we established a theoretical model and derived a theoretical mechanism from this model revealing two distinctive patterns of the impacts determined by the profitability of financial derivatives the impacts of financial innovation and systematic risk on banks stability in china are linear under the circumstances of a positive expected risk premium of financial derivatives conversely the impacts can be linear u shaped or cubic when the expected risk premium is negative we make three propositions to analyse the patterns and conditions of these impacts in detail in the empirical analysis we do not focus only on the banking industry but also on individual commercial banks the empirical results demonstrate that the impact of financial innovation on both the banking industry s and most individual commercial banks stability are u shape

risk and hedging do credit derivatives increase bank risk abstract the objective of this paper is to investigate whether financial innovation of credit derivatives makes banks more exposed to credit risk although credit derivatives are important for hedging and securitizing credit risk and thereby likely to enhance the sharing of such risk some commentators have raised concerns that they may destabilize the banking sector this paper investigates this issue in a simple model driven by costs of financial distress the analysis identifies two effects of credit derivatives innovation they enhance risk sharing as suggested by the hedging argument but they also make further acquisition of risk more attractive the latter effect if dominant can therefore destabilize the banking sector the critical factor is perhaps surprisingly the competitive nature of the existing underlying credit markets as these markets become more elastic the threat of destabilization increases the paper discusses issues related to bank regulation within the context of the model

from stationary state to endogenous growth international trade in the mathematical formulation of the ricardian system in his 1814 15 correspondence with malthus and in his essay on profits ricardo championed the free importation of wage goods as a highly effective growth enhancing policy in order to capture this aspect in the mathematical formulation of the ricardian system first introduced by pasinetti in 1960 in the context of a closed economy we produce a variant of that model where the economy is a small open one we show that this economy is characterised by endogenous growth since the growth rate is bounded from below and we locate two thresholds concerning the allocation of labour among the two sectors of the economy and the pattern of international trade

technological learning and labor market dynamics the search and matching model of the labor market fails to match two important business cycle facts i a high volatility of unemployment relative to that of labor productivity and ii a mild correlation between these two variables we address these shortcomings by focusing on the implementation process of technological innovation that is the empirical nding that new technologies are subject to a learning process we consider a novel source of business cycles namely uctuations in the ease or speed of technological learning and show that a search and matching model featuring such shocks can account for both facts moreover our model provides a new interpretation of news shocks discussed in the recent business cycle literature

europe s industrialization and colonial underdevelopment in the light of ricardo s corn model abstract the paper discusses the dynamics of sectoral resource allocation in an extension of ricardo s corn model to a north south world system it is shown that free trade and capital mobility in the presence of capital accumulation must entail in the flexible wage metropolis a secular shift of resources out of agriculture into manufacturing accompanied by real wage growth in the labor surplus colonies a necessary expansion of commerical agriculture but an ambiguous evolution of manufacturing output and employment giving rise to the possibility of a secular contraction in overall colonial market employment

mood swings and business cycles evidence from sign restrictions this paper provides new evidence that bouts of optimism and pessimism are an important source of u s business cycles using the identification schemes based on sign restrictions we document that identified optimism and pessimism shocks account for about 30 of u s business cycle fluctuations in hours and output in addition our empirical findings are consistent with the intensive and extensive margin adjustments in the u s labor market over business cycles providing further support to optimism shocks being an important source of u s business cycles the identified optimism shocks are at least partially rational as total factor productivity is found to rise 8 12 quarters after an initial bout of optimism while this later finding is consistent with some previous findings in the news shock literature we cannot rule out that such episodes reflect self fulfilling beliefs

labor market dynamics with endogenous labor force participation and on the job search abstract studies that incorporate endogenous labor force participation and search and matching frictions in a real business cycle model report that the model generates counterfactual dynamics 1 labor force participation is very volatile and strongly procyclical 2 unemployment is weakly procyclical or acyclical 3 unemployment and vacancies are positively correlated to improve the model s performance i enrich the model with on the job search as a mechanism to dampen the movements of participation and keep vacancy creation high for longer periods the proposed model successfully generates weakly procyclical participation strongly countercyclical unemployment and the beveridge curve the model also succeeds in matching the statistics for labor force participation and job to job flows

revisiting the matching function abstract there is strong empirical evidence for cobb douglas matching functions we show in this paper that this widely found relation between matches on the one hand and unemployment and vacancies on the other hand can be the result of different underlying mechanisms obviously it can be generated by assuming a cobb douglas matching function less obvious the same relationship results from a vacancy free entry condition and idiosyncratic productivity shocks a positive aggregate productivity shock leads to more vacancy posting a shift of the idiosyncratic selection cutoff and thereby more hiring we calibrate a model with both mechanisms to administrative german labor market data and show that idiosyncratic productivity for new contacts is an important driver of the elasticity of the job finding rate with respect to the market tightness accounting for idiosyncratic productivity can explain the observed negative time trend in estimated matching efficiency and asymmetric business cycle responses to large aggregate shocks

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

vacancy posting job separation and unemployment fluctuations abstract what is the relative importance of hiring and separation in driving unemployment fluctuations this paper presents a framework to decompose the moments of unemployment and study the respective contributions of vacancy posting a measure of firms hiring efforts and separation separation accounts for about 40 of unemployment s variance compared to 60 for vacancy posting and contributes to about 60 of unemployment steepness asymmetry the fact that unemployment increases faster than it decreases further while vacancy posting is on average the most important contributor of unemployment fluctuations the opposite is true around business cycle turning points when separation is responsible for most of unemployment movements

factor complementarity and labour market dynamics abstract we propose and estimate a dynamic stochastic general equilibrium model featuring search and matching frictions deep habits and a ces production function the model successfully replicates the cyclical properties of labour market variables in the us economy for three main reasons first two of the endogenous mechanisms of the model factor complementarity and unemployment benefits play a key role for explaining the amplification in unemployment and vacancies second deep habits have a smaller but significant role as an endogenous mechanism third capital augmenting productivity investment specific and matching efficiency innovations explain large part of the variation in labour market variables

home equity mobility and macroeconomic fluctuations how does a fall in house prices affect real activity this paper presents a business cycle model in which a decline in house prices reduces geographical mobility creating distortions in the labor market this happens because homeowners face declines in their home equity levels after which it becomes more difficult to provide the down payment required for a new mortgage loan unemployed homeowners therefore turn down job offers that would require them to move the model explains joint cyclical patterns in housing and labor market aggregates as well as the puzzling breakdown of the u s beveridge curve that occurred during 2009

debt hangover in the aftermath of the great recession following the great recession u s government debt levels exceeded 100 of output we develop a macroeconomic model to evaluate the role of various shocks during and after the great recession labor market shocks have the greatest impact on macroeconomic activity we then evaluate the consequences of using alternative fiscal policy instruments to implement a fiscal austerity program to return the debt output ratio to its pre great recession level our welfare analysis reveals that there is not much difference between applying fiscal austerity through government spending the labor income tax or the consumption tax using the capital income tax is welfare reducing

reprint of the general equilibrium impacts of unemployment insurance evidence from a large online job board abstract during the great recession u s unemployment benefits were extended by up to 73 weeks theory predicts that extensions increase unemployment by discouraging job search a partial equilibrium effect using data from the large job board careerbuilder com i find that a 10 increase in benefit duration decreased state level job applications by 1 but had no robust effect on job vacancies job seekers thus faced reduced competition for jobs a general equilibrium effect calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 39

bank systemic risk and macroeconomic shocks canadian and u s evidence abstract this paper investigates how banks as a group react to macroeconomic risk and uncertainty more specifically it examines the relationship between bank systemic risk and changes and disruptions in economic conditions adopting the methodology of beaudry et al 2001 we introduce a new estimation procedure based on egarch to refine the framework developed by baum et al 2002 baum et al 2004 baum et al 2009 and quagliariello 2007 quagliariello 2009 and we analyze the relationship in the current industry context i e in the context of market based banking our results confirm that banks tend to behave more homogeneously vis a vis macroeconomic uncertainty in particular we find that both the cross sectional dispersion of loans to assets and the cross sectional dispersion of non interest income share shrink during slow growth episodes and particularly during financial crises when the resilience of the banking system is at its lowest more importantly our main findings indicate that the cross sectional dispersion of loans to assets has increased in the last decade whereas the cross sectional dispersion of non interest income share appears to be more volatile and sensitive to macroeconomic shocks

building a composite help wanted index abstract this paper builds a measure of vacancy posting over 1951 2009 that captures the behavior of total print and online help wanted advertising and can be used for time series analysis of the us labor market

unemployment fluctuations over the life cycle abstract in this paper we show that i the volatility of worker flows increases with age in us cps data and ii a search and matching model with life cycle features endogenous separation and search effort is well suited to explain this fact with a shorter horizon on the labor market older workers outside options become less responsive to new employment opportunities thereby making their wages less sensitive to the business cycle their job finding and separation rates are then more volatile along the business cycle the horizon effect cannot explain the significant differences between prime age and young workers as both age groups are far away from retirement a lower bargaining power on the youth labor market brings the model closer to the data

employment efficiency and sticky wages evidence from flows in the labor market i consider three views of the labor market in the first wages are flexible and employment follows the principle of bilateral efficiency workers never lose their jobs because of sticky wages in the second wages are sticky and inefficient layoffs do occur in the third wages are also sticky but employment governance is efficient i show that the behavior of flows in the labor market strongly favors the third view in the modern u s economy recessions do not begin with a burst of layoffs unemployment rises because jobs are hard to find not because an unusual number of people are thrown into unemployment

labor market participation unemployment and monetary policy models of unemployment and monetary policy usually assume constant participation incorporating a participation decision into a standard new keynesian model with matching frictions we show that market tightness becomes endogenously more volatile because both the opportunity cost of home production and the reservation wage vary with participation the model can simultaneously explain the low volatility of participation the high volatility of unemployment and a procyclical workers outside option of working a policy of strict inflation targeting is close to optimal and increasing the response of the interest rate to inflation does not have a large impact on the volatility of unemployment because of the endogenous response of participation

monetary policy trend inflation and unemployment volatility the literature has long agreed that the dmp model after diamond 1982 mortensen 1982 pissarides 1985 with search and matching frictions in the labor market can deliver large volatilities in labor market quantities consistent with empirical data only if there is at least some wage stickiness i show however that the model can deliver nontrivial volatilities without wage stickiness as long as it has price dispersion and nonzero long run inflation rates i find that by keeping inflation at a positive rate monetary policy may be accountable for the large standard deviations observed on labor market variables in addition the shimer 2005 puzzle disappears under monetary policy shocks

factor substitution and labor market friction in the united states 1948 2010 we re estimate the capital labor elasticity of substitution and the biased factor augmenting technological progress using a system approach for the aggregate u s economy from 1948 to 2010 due to

lost generations of firms and aggregate labor market dynamics abstract can the unprecedented lack of startups during the u s great recession have persistently negative effects while fewer firms hiring workers can mechanically reduce employment for many years this may be offset by feedback effects on lower wages slacker labor markets and higher profits an estimated model of firm dynamics and frictional labor markets suggests that such feedback effects are too weak to offset the direct impact of fewer startups had firm entry remained constant during the great recession output would have recovered 4 6 years earlier and unemployment would have been 0 5 percentage points lower even 10 years after the crisis

sectoral differences in the use of information technology and matching efficiency in the us labour market the present study examines how the heterogeneity of use of information technology in production affects the probability that an unemployed worker will be matched with a vacancy using us time series from 1967 to 2007 i construct measures of dispersion of the stocks of software and hardware per worker across 13 industries the measures exhibit three waves whose timing roughly corresponds to the diffusion of mainframe computers in the 1960s and 1970s personal computers in the 1980s and the internet in the late 1990s after controlling for other influences i find that the probability of transitioning from unemployment to employment responds negatively to an increase in either measure the results imply that by enhancing technical heterogeneity the diffusion of a new technology may suppress the job finding rate

house prices and job losses why are house prices 80 correlated with job losses over the uk business cycle my paper studies this striking fact together with the strong comovements between house prices and labour market variables in general first a regional panel is estimated to quantify the impact of house prices on the unemployment job finding and job separation rates whereby rejection rates of planning applications are used as instruments to find exogenous variation in house prices second an orthogonalised var is used to estimate the aggregate impact of house price shocks both methods confirm the large impact of house price shocks on labour market variables and credit supply to understand the mechanism a general equilibrium model with collateral constraints endogenous job separation and housing shocks is confronted with macroeconomic data via bayesian methods the results suggest that shocks to house prices i explain about 10 of output fluctuations and about 20 of fluctuations in corporate credit unemployment and job separation rates via the collateral channel over the forecast horizon and ii were a major cause in triggering the 1990 and 2008 recessions in the uk

state dependence in labor market fluctuations this paper documents state dependence in labor market uctuations using a threshold vector autoregression model tvar we establish that the unemployment rate the job separation rate and the job finding rate exhibit a larger response to productivity shocks during periods with low aggregate productivity a diamond mortensen pissarides model with endogenous job separation and on the job search replicates these empirical regularities well we calibrate the model to match the standard deviation of the job transition rates explained by productivity shocks in the tvar and show that the model explains 88 percent of the state dependence in the unemployment rate 76 percent for the separation rate and 36 percent for the job finding rate the key channel underpinning state dependence in both job separation and job finding rates is the interaction of the firm s reservation productivity level and the distribution of match specific idiosyncratic productivity results are robust across several variations to the baseline model

models of technology diffusion abstract the literature on new technology diffusion is vast and it spills over many conventional disciplinary boundaries this paper surveys the literature by focusing on alternative explanations of the dominant stylized fact that the usage of new technologies over time typically follows an s curve the most commonly found model which is used to account for this model is the so called epidemic model which builds on the premise that what limits the speed of usage is the lack of information available about the new technology how to use it and what it does the leading alternate model is often called the probit model which follows from the premise that different firms with different goals and abilities are likely to want to adopt the new technology at different times in this model diffusion occurs as firms of different types gradually adopt it there are actually many ways to generate an s curve and the third class of models which we examine are models of density dependence popularized by population ecologists in these models the twin forces of legitimation and competition help to establish new technologies and then ultimately limit their take up finally we look at models in which the initial choice between different variants of the new technology affect the subsequent diffusion speed of the chosen technology such models often rely on information cascades which drive herd like adoption behaviour when a particular variant is finally selected

labor supply factors and economic fluctuations we propose a new v ar identication scheme that enables us to disentangle labor supply shocks from wage bargaining shocks identication is achieved by imposing robust sign restrictions that are derived from a new keynesian model with endogenous labor force par ticipation according to our analysis on us data over the period 1985 2014 labor supply shocks and wage bargaining shocks are important drivers of output and unemployment both in the short run and in the long run these results suggest that identication strategies used in estimated new keynesian models to disentangle labor market shocks may be misguided we also analyze the behavior of the labor force participation rate through the lenses of our model wend that labor supply shocks are the main drivers of the participation rate and account for about half of its decline in the aftermath of the great recession

the establishment level behavior of vacancies and hiring this paper is the first to study vacancies hires and vacancy yields at the establishment level in the job openings and labor turnover survey a large sample of u s employers to interpret the data we develop a simple model that identifies the flow of new vacancies and the job filling rate for vacant positions the job filling rate moves counter to aggregate employment but rises steeply with employer growth rates in the cross section it falls with employer size rises with worker turnover rates and varies by a factor of four across major industry groups we also develop evidence that the employer level hiring technology exhibits constant returns and that at the employer level and that employers rely heavily on other instruments in addition to vacancies as they vary hires we also develop evidence that effective recruiting intensity per vacancy varies over time accounting for about 41 of movements in aggregate hires in the 2007 to 2009 period our evidence and analysis provide useful inputs for assessing developing and calibrating theoretical models of search matching and hiring in the labor market

how the ins and outs shape differently the u s unemployment over time and across frequencies abstract although the u s case has been studied extensively the importance of job finding and separation rates to unemployment variability remains unsettled the aim of this paper is to contribute to this debate by adopting a novel lens wavelet analysis we resort to wavelet analysis to unveil time and frequency varying features regarding the contribution of the job finding and job separation rates for the u s unemployment rate dynamics drawing on this approach we are able to reconcile some apparently contradictory findings reported in previous literature we find that the job finding rate is more influential for the overall unemployment behaviour but the job separation rate also plays a critical role especially during recessions in particular the job separation rate accounts for on average 53 per cent of the unemployment variability at short run fluctuations during recessions in sharp contrast with an overall contribution of 21 per cent over time and across frequencies

aggregate demand idle time and unemployment this paper develops a model of unemployment fluctuations the model keeps the architecture of the barro and grossman 1971 general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework on the product and labor markets both price and tightness adjust to equalize supply and demand there is one more variable than equilibrium condition on each market so we consider various price mechanisms to close the model from completely flexible to completely rigid with some price rigidity aggregate demand influences unemployment through a simple mechanism higher aggregate demand raises the probability that firms find customers which reduces idle time for firms employees and thus increases labor demand which in turn reduces unemployment we use the comparative statics predictions of the model together with empirical measures of quantities and tightnesses to re examine the origins of labor market fluctuations we conclude that 1 price and real wage are not fully flexible because product and labor market tightness fluctuate significantly 2 fluctuations are mostly caused by labor demand and not labor supply shocks because employment is positively correlated with labor market tightness and 3 labor demand shocks mostly reflect aggregate demand and not technology shocks because output is positively correlated with product market tightness

financial innovation and bank behavior evidence from credit markets this paper investigates whether and through which channel the active use of credit derivatives changes bank behavior in the credit market and how this channel was affected by the crisis of 2007 2009 our principal finding is that banks with larger gross positions in credit derivatives charge significantly lower corporate loan spreads while banks net positions are not consistently related to loan pricing we argue that this is consistent with banks passing on risk management benefits to corporate borrowers but not with alternative channels through which credit derivative use may affect loan pricing we also find that the magnitude of the risk management effect remained unchanged during the crisis period of 2007 2009 in addition banks with larger gross positions in credit derivatives cut their lending by less than other banks during the crisis and have consistently lower loan charge offs in sum our study is suggestive of significant risk management benefits from financial innovations that persist under adverse conditions that is when they matter most

rethinking classical trade analyses within a framework of capitalist development a classical trade theory which comprises smith s productivity theory ricardo s reasoning against the corn laws torrens s argument for extended colonisation and mill s recommendation to send capital abroad is advanced it portrays england s economic expansion in the nineteenth century lacunae exist however because of these economists belief in the automatic spread of industries to the agricultural countries and their inattention to the economic advances made by the late coming capitalist countries as well as the impact of england s capital exports on the capital importing countries subsequent researches which address these and which relate to current debates on theories and policies are discussed 1996 academic press limited

the validity of the long run heckscher ohlin theorem in the ricardian system applying burgstaller s ricardian two sector growth model to the two country open economy this paper shows that the long run heckscher ohlin theorem holds also in a ricardian world in addition it is shown that if two ricardian countries that are different only in their demand parameters open trade comparative advantage and the corresponding trade pattern at trade opening continue in the long run after the opening of trade

worker search effort as an amplification mechanism abstract it is well known that the diamond mortensen pissarides model exhibits a strong trade off between cyclical unemployment fluctuations and the size of rents to employment introducing endogenous job search effort reduces the strength of the trade off while bringing the model closer to the data ignoring worker search effort leads to a large upward bias in the elasticity of matches with respect to vacancies merging the american time use survey and the current population survey new evidence in support of procyclical search effort is presented average search effort of the unemployed is subject to cyclical composition biases

long term unemployment and the great recession the role of composition duration dependence and nonparticipation we explore the role of composition duration dependence and labor force nonparticipation in accounting for the sharp increase in the incidence of long term unemployment ltu during the great recession we show that compositional shifts account for very little of the observed increase in ltu using panel data from the current population survey for 2002 7 we calibrate a matching model that allows for duration dependence in unemployment and transitions between employment unemployment and nonparticipation the calibrated model accounts for almost all of the increase in ltu and much of the observed outward shift in the beveridge curve between 2008 and 2013

factor proportions and ricardian comparative advantage thoughts on uchiyama in a ricardo pasinetti world inferring a long run comparative advantage from a stationary state factor proportions differential is invalid since the latter may be present in the absence of the former and will be a consequence not the cause of long run comparative advantage where such exists

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

technological learning and labor market dynamics learning and labor market dynamics the search and matching model of the labor market fails to match two important business cycle facts i a high volatility of unemployment relative to labor productivity and ii a mild correlation between these two variables we address these shortcomings by focusing on technological learning by doing the notion that it takes workers time using a technology before reaching their full productive potential with it we consider a novel source of business cycles namely fluctuations in the speed of technological learning and show that a search and matching model featuring such shocks can account for both facts moreover our model provides a new interpretation of recently discussed news shocks

unemployment fluctuations match quality and the wage cyclicality of new hires we revisit the issue of the high cyclicality of wages of new hires we show that after controlling for composition effects likely involving procyclical upgrading of job match quality the wages of new hires are no more cyclical than those of existing workers the key implication is that the sluggish behaviour of wages for existing workers is a better guide to the cyclicality of the marginal cost of labour than is the high measured cyclicality of new hires wages unadjusted for composition effects key to our identification is distinguishing between new hires from unemployment versus those who are job changers we argue that to a reasonable approximation the wages of the former provide a composition free estimate of the wage flexibility while the same is not true for the latter we then develop a quantitative general equilibrium model with sticky wages via staggered contracting on the job search and heterogeneous match quality and show that it can account for both the panel data evidence and aggregate evidence on labour market volatility

macroeconomic fluctuations with hank sam an analytical approach new keynesian models with unemployment and incomplete markets are rapidly becoming a new workhorse model in macroeconomics such models typically require heavy computational methods which may obscure intuition and overlook equilibria we present a tractable version which can be characterized analytically our results highlight that ndue the interaction between incomplete markets sticky prices and endogenous unemployment risk nproductivity shocks may have radically di erent e ects than in traditional nk models that the taylor principle may fail and that pessimistic beliefs may be self fulolling and move the economy into temporary episodes of low demand and high unemployment as well as into a long lasting iunemployment trapi at the zero lower bound the presence of endogenous unemployment risk can create inaation and overturn paradoxical properties of the model we further study onancial asset prices and show that non negligible risk premia emerge

unifying ricardo s theories of growth and comparative advantage the paper formally integrates ricardo s two sector growth model with his theory of comparative advantage differences with conventional representations of ricardian trade theory as well as with heckscher ohlin samuelson theory are noted it is shown that the ricardian equilibrium terms of trade are fully determinate as against the standard millian view also trade may depending on direction of specialization inhibit rather than promote growth and lead to a net contraction of the world economy copyright 1986 by the review of economic studies limited

mismatch shocks and unemployment during the great recession summary 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 dynamic stochastic general equilibrium 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 copyright 2016 john wiley sons ltd

the beveridge curve a survey important progress has been made in economists understanding of the beveridge curve from its measurement to its expression in canonical labor market models yet enduring puzzles remain chief among these are the empirical role of vacancies in the recruitment process the amplitude comovement and persistence of cyclical unemployment vacancy dynamics and the sources of lateral shifts in the beveridge curve the synthesis of these themes identifies several priorities for ongoing research including the role of entry costs into vacancy creation in shaping beveridge dynamics the cyclicality of search intensity both off and on the job and its relation to participation and job to job transitions the theory and measurement of mismatch and the sources of hysteresis in unemployment flows

persistence and volatility of beveridge cycles this paper aims to explain the magnitude and cyclical behavior of the fluctuations in unemployment and vacancies adding demand externalities to an otherwise standard search and matching model reduces the need for exogenous shocks in explaining these fluctuations under plausible parameter values the equilibrium dynamics include a stable limit cycle that resembles the empirically observed counterclockwise cycles around the beveridge curve quantitatively these endogenous beveridge cycles can explain half of the volatility and almost all persistence of unemployment without any exogenous forces avoiding the amplification and propagation problems of the standard model