Working Paper

The Business Cycle Mechanics of Search and Matching Models

Abstract: This paper estimates a real business cycle model with unemployment driven by shocks to labor productivity and the job separation rate. We make two contributions. First, we develop a new identification scheme based on the matching elasticity that allows the model to perfectly match a range of labor market moments, including the volatilities of unemployment and vacancies. Second, we use our model to revisit the importance of shocks to the job separation rate and highlight how their correlation with labor productivity affects their transmission mechanism.

Keywords: Real Business Cycles; Estimation; Unemployment; Separation Rate; Vacancies;

JEL Classification: C13; E24; E32; E37; J63;

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Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 2020-08-25

Number: 2026