Abstract

http://ssrn.com/abstract=1847339
 
 

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New Evidence on Cyclical and Structural Sources of Unemployment


Jinzhu Chen


affiliation not provided to SSRN

Prakash Kannan


International Monetary Fund (IMF)

Bharat Trehan


Federal Reserve Bank of San Francisco

Prakash Loungani


International Monetary Fund (IMF)

May 2011

IMF Working Paper No. 11/106

Abstract:     
We provide cross-country evidence on the relative importance of cyclical and structural factors in explaining unemployment, including the sharp rise in U.S. long-term unemployment during the Great Recession of 2007-09. About 75% of the forecast error variance of unemployment is accounted for by cyclical factors-real GDP changes (Okun‘s Law), monetary and fiscal policies, and the uncertainty effects emphasized by Bloom (2009). Structural factors, which we measure using the dispersion of industry-level stock returns, account for the remaining 25 percent. For U.S. long-term unemployment the split between cyclical and structural factors is closer to 60-40, including during the Great Recession.

Number of Pages in PDF File: 43

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Date posted: May 20, 2011  

Suggested Citation

Chen, Jinzhu and Kannan, Prakash and Trehan, Bharat and Loungani, Prakash, New Evidence on Cyclical and Structural Sources of Unemployment (May 2011). IMF Working Papers, Vol. , pp. 1-42, 2011. Available at SSRN: http://ssrn.com/abstract=1847339

Contact Information

Jinzhu Chen
affiliation not provided to SSRN
Prakash Kannan (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
(202)623-8806 (Phone)
Bharat Trehan
Federal Reserve Bank of San Francisco ( email )
101 Market Street
San Francisco, CA 94105
United States
Prakash Loungani
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
202-623-7043 (Phone)
202-623-4740 (Fax)
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