Beveridge Curve Shifts and Time-Varying Parameter Vars

30 Pages Posted: 3 Aug 2017 Last revised: 30 Aug 2017

See all articles by Thomas A. Lubik

Thomas A. Lubik

Johns Hopkins University - Department of Economics

Christian Matthes

Federal Reserve Bank of Richmond

Andrew Patrick Owens

Independent

Date Written: 2016

Abstract

We specify a simple search and matching model of the aggregate labor market allowing for productivity-driven changes in match efficiency. This mechanism leads to shifts in the Beveridge curve that are broadly consistent with the pattern observed in the United States. We simulate data from the fully nonlinear solution of the model and estimate a time-varying parameter vector-autoregressions (TVP-VAR) on the unemployment and vacancies series to assess whether the shifts in the underlying theoretical model are being picked up by the nonlinear time series model. The results suggest that the TVP-VAR attributes almost all of the shifts to changes in the volatility of the reduced-form shocks.

Keywords: Beveridge curve, TVP-VAR, time-varying parameter vector-autoregressions, labor market

Suggested Citation

Lubik, Thomas A. and Matthes, Christian and Owens, Andrew Patrick, Beveridge Curve Shifts and Time-Varying Parameter Vars (2016). Economic Quarterly, Issue 3Q, pp. 197-226, 2016. Available at SSRN: https://ssrn.com/abstract=3013019

Thomas A. Lubik (Contact Author)

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

Christian Matthes

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Andrew Patrick Owens

Independent ( email )

Richmond, VA
United States

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