Mismatch Shocks and Unemployment During the Great Recession

Francesco Furlanetto and Nicolas Groshenny

No 2014-07, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

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: 102 pages.
Date: 2014-08
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Citations: View citations in EconPapers (3)

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https://media.adelaide.edu.au/economics/papers/doc/wp2014-07.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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Persistent link: https://EconPapers.repec.org/RePEc:adl:wpaper:2014-07

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