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Author:Bernstein, Joshua 

COVID-19’s Unprecedented Impact Alters U.S. Labor Market

A staggering 22.03 million initial claims for unemployment benefits were filed from mid-March to mid-April as the COVID-19 pandemic and ensuing stay-at-home policies took hold across the country.
Dallas Fed Economics

Working Paper
Nonlinear Search and Matching Explained

Competing explanations for the sources of nonlinearity in search and matching modelsindicate that they are not fully understood. This paper derives an analytical solution to atextbook model that highlights the mechanisms that generate nonlinearity and quantifiestheir contributions. Procyclical variation in the matching elasticity creates nonlinearity inthe job finding rate, which interacts with the law of motion for unemployment. These resultsshow the matching function choice is not innocuous. Quantitatively, the Den Haan et al.(2000) matching function more than doubles the skewness of ...
Working Papers , Paper 2106

Working Paper
The Matching Function and Nonlinear Business Cycles

The Cobb-Douglas matching function is ubiquitous in search and matching models, even though it imposes a constant matching elasticity that is unlikely to hold empirically. Using a general constant returns to scale matching function, this paper first derives analytical conditions that determine how the cyclicality of the matching elasticity amplifies or dampens the nonlinear dynamics of the job finding and unemployment rates. It then demonstrates that these effects are quantitatively significant and driven by plausible variation in the matching elasticity.
Working Papers , Paper 2201

Working Paper
Countercyclical Fluctuations in Uncertainty are Endogenous

This paper uses a battery of calibrated and estimated structural models to determine the causal drivers of the negative correlation between output and aggregate uncertainty. We find the transmission of uncertainty shocks to output is weak, while aggregate uncertainty endogenously responds to first moment shocks in the presence of labor market search frictions. This indicates that countercyclical movements in aggregate uncertainty are endogenous responses to changes in output, rather than exogenous impulses. A vector autoregression on simulated data shows recursive identification techniques do ...
Working Papers , Paper 2109

Entry, Exit of Firms Amplify the Business Cycle

When new businesses are created, they generate new jobs. When unprofitable businesses close, employees lose their jobs. Given the connection between firm entry and exit and changes in employment, it is natural to ask how this entry and exit affects the broader business cycle.
Dallas Fed Economics

Working Paper
Entry and Exit, Unemployment, and Macroeconomic Tail Risk

This paper builds a nonlinear business cycle model with endogenous firm entry and exit and equilibrium unemployment. The entry and exit mechanism generates asymmetry and amplifies the transmission of productivity shocks, exposing the economy to significant tail risk. When calibrating the rates of entry and exit to match their shares of job creation and destruction, our quantitative model generates higher-order moments consistent with U.S. data. Firm exit particularly amplifies the severity and persistence of deep recessions such as the COVID-19 crisis. In the absence of entry and exit, the ...
Working Papers , Paper 2018

Working Paper
The Business Cycle Mechanics of Search and Matching Models

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.
Working Papers , Paper 2026

Working Paper
COVID-19: A View from the Labor Market

This paper examines the response of the U.S. labor market to a large and persistent job separation rate shock, motivated by the ongoing economic effects of the COVID-19 pandemic. We use nonlinear methods to analytically and numerically characterize the responses of vacancy creation and unemployment. Vacancies decline in response to the shock when firms expect persistent job destruction and the number of unemployed searching for work is low. Quantitatively, under our baseline forecast the unemployment rate peaks at 19.7%, 2 months after the shock, and takes 1 year to return to 5%. Relative to ...
Working Papers , Paper 2010

Working Paper
Entry and Exit, Unemployment, and the Business Cycle

Establishment entry and exit is strongly correlated with output and unemployment. This paper examines how these linkages affect business cycle dynamics through the lens of a search and matching model augmented to include multi-worker establishments that endogenously enter and exit. Analytical results show cyclical entry and exit cause reallocation of inputs that amplifies and skews business cycle dynamics. When the model is calibrated to the data, it generates realistic asymmetry in output and unemployment, data-consistent counter-cyclical endogenous uncertainty and a 55% higher welfare cost ...
Working Papers , Paper 2018




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