Does the Shimer puzzle really exist in the American labour market?

Document Type

Article

Publication Date

1-1-2021

Abstract

This paper employs a dynamic stochastic general equilibrium (DSGE) method to systematically compare Shimer's and Hagedorn-Manovskii's calibration approaches to the analysis of the Shimer puzzle. The findings indicate that adopting an appropriate calibration strategy may help with solving two aspects of the Shimer puzzle by generating more accurate standard errors for unemployment and elasticity of the v-u ratio with respect to productivity. However, there still remains a tendency to fail to generate an accurate standard deviation for vacancy, which is the unsolvable aspect of the Shimer puzzle.

Keywords

Employment fluctuation, Sequilibrium unemployment, Cyclical behavior, Moral hazard, Model

Divisions

aei

Funders

Tun IsmailAli Chair (TIAC) Research Grant [TIACRG2018.23]

Publication Title

Economics Bulletin

Volume

41

Issue

3

Publisher

Economics Bulletin

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