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Federal Reserve Bank of Richmond
Economic Quarterly
Beveridge Curve Shifts and Time-Varying Parameter VARs
Thomas A. Lubik
Christian Matthes
Andrew Owens
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.


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Thomas A. Lubik & Christian Matthes & Andrew Owens, "Beveridge Curve Shifts and Time-Varying Parameter VARs" , Federal Reserve Bank of Richmond, Economic Quarterly, issue 3Q, pages 197-226, 2016.
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Keywords: Beveridge curve; TVP-VAR; time-varying parameter vector-autoregressions; labor market
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