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Working Paper

The Cyclical Behavior of Equilibrium Unemployment and Vacancies across OECD Countries

We show that the inability of a standardly calibrated labor search-and-matching model to account for labor market volatility extends beyond the U.S. to a set of OECD countries. That is, the volatility puzzle is ubiquitous. We argue cross-country data is helpful in scrutinizing between potential solutions to this puzzle. To illustrate this, we show that the solution proposed in Hagedorn and Manovskii (2008) continues to deliver counterfactually low volatility in countries where labor-productivity persistence and/or steady-state job-finding rates are sufficiently low. Moreover, the model's ability to generate high enough volatility depends on vacancy-filling-rate levels that seem counterfactual outside the U.S.
Topics
Econometrics modeling and forecasting
Labor economics
12.25.2012ISSN 2573-7953 WP 12-36Revisions WP 12-36R, WP 12-36R2DOI 10.26509/frbc-wp-201236
Keywords labor market, vacancies, unemployment, oecd countries
JEL Classification Codes E24, E32, J63, J64

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Amaral, Pedro S., and Murat Tasci. 2012. “The Cyclical Behavior of Equilibrium Unemployment and Vacancies across OECD Countries .” Federal Reserve Bank of Cleveland, Working Paper No. 12-36. https://doi.org/10.26509/frbc-wp-201236