The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited
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- 1 August 2008
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 98 (4) , 1692-1706
- https://doi.org/10.1257/aer.98.4.1692
Abstract
Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We propose a new calibration strategy of the standard model that uses data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters –- the value of nonmarket activity and the bargaining weights. Our calibration implies that the model is consistent with the data. (JEL E24, E32, J31, J63, J64)Keywords
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