Business Cycles and the Labour Market: Can Theory Fit the Facts?

Bank of England Working Paper No. 93

40 Pages Posted: 14 Sep 1999

See all articles by Stephen Millard

Stephen Millard

Bank of England

Andrew Scott

London Business School - Department of Economics; Centre for Economic Policy Research (CEPR)

Marianne Sensier

University of Manchester

Date Written: 1999

Abstract

The performance of six alternative models in accounting for UK labour market behaviour over the business cycle is examined. Models are assessed in terms of their ability to mimic actual cycle correlations and volatility, their success in replicating persistence, and their success in modelling asymmetries between expansions and downturns. Most are found to be successful in accounting for co-movements of key variables and in explaining asymmetries. But the models underpredict the volatility of employment and unemployment, produce too high a correlation between wages and employment, and do not capture the slow adjustment exhibited in the data.

JEL Classification: E24, E32, J64

Suggested Citation

Millard, Stephen and Scott, Andrew and Sensier, Marianne, Business Cycles and the Labour Market: Can Theory Fit the Facts? (1999). Bank of England Working Paper No. 93, Available at SSRN: https://ssrn.com/abstract=179690 or http://dx.doi.org/10.2139/ssrn.179690

Stephen Millard (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Andrew Scott

London Business School - Department of Economics ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
+44 20 7706 6780 (Phone)
+44 20 7402 7875 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Marianne Sensier

University of Manchester ( email )

Economics, Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

HOME PAGE: http://www.socialsciences.manchester.ac.uk/disciplines/economics/about/staff/sensier/

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