The Ins and Outs of Unemployment: An Analysis Conditional on Technology Shocks

25 Pages Posted: 8 Jun 2013

See all articles by Fabio Canova

Fabio Canova

Bi norwegian business school

David Lopez-Salido

Board of Governors of the Federal Reserve System

Claudio Michelacci

Centre for Monetary and Financial Studies (CEMFI); Centre for Economic Policy Research (CEPR)

Date Written: June 2013

Abstract

We analyse how unemployment, job‐finding and job‐separation rates react to neutral and investment‐specific technology shocks. Neutral shocks increase unemployment and explain a substantial portion of it volatility; investment‐specific shocks expand employment and hours worked and contribute to hours worked volatility. Movements in the job‐separation rates are responsible for the impact response of unemployment while job‐finding rates for movements along its adjustment path. The evidence warns against using models with exogenous separation rates and challenges the conventional way of modelling technology shocks in search and sticky price models.

Suggested Citation

Canova, Fabio and Lopez-Salido, David and Michelacci, Claudio, The Ins and Outs of Unemployment: An Analysis Conditional on Technology Shocks (June 2013). The Economic Journal, Vol. 123, Issue 569, pp. 515-539, 2013. Available at SSRN: https://ssrn.com/abstract=2276333 or http://dx.doi.org/10.1111/j.1468-0297.2012.02548.x

Fabio Canova (Contact Author)

Bi norwegian business school ( email )

Nydalsveien 37
Oslo, 0484
Norway

David Lopez-Salido

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Claudio Michelacci

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain
+34 91 4290 551 (Phone)
+34 91 4291 056 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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