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Working Paper
The time-varying Beveridge curve
We use a Bayesian time-varying parameter structural VAR with stochastic volatility to investigate changes in both the reduced-form relationship between vacancies and the unemployment rate, and in their relationship conditional on permanent and transitory output shocks, in the post-WWII United States. Evidence points towards similarities and differences between the Great Recession and the Volcker disinflation, and wide-spread time variation along two key dimensions. First, the slope of the Beveridge curve exhibits a large extent of variation from the mid-1960s on. It is also notably ...
Working Paper
How To Go Viral: A COVID-19 Model with Endogenously Time-Varying Parameters
This paper estimates a panel model with endogenously time-varying parameters for COVID-19 cases and deaths in U.S. states. The functional form for infections incorporates important features of epidemiological models but is flexibly parameterized to capture different trajectories of the pandemic. Daily deaths are modeled as a spike-and-slab regression on lagged cases. The paper's Bayesian estimation reveals that social distancing and testing have significant effects on the parameters. For example, a 10 percentage point increase in the positive test rate is associated with a 2 percentage point ...
Briefing
Using Inventories to Help Explain Post-1984 Business Cycles
Real business cycle (RBC) models have been highly successful at explaining business cycles that occurred before 1984. But since then, shifts in comovements and relative volatilities of key economic aggregates have challenged their preeminence. One possible refinement of the standard RBC model is to include multiple stages of production. This extension allows researchers to use inventory data to estimate the discount rate that firms use to assess future income streams. The results indicate that variations in the discount rate reflect financial frictions that have become significant drivers of ...
Briefing
Public and Private Debt after the Pandemic and Policy Normalization
As a result of the COVID-19 pandemic, public debt has increased dramatically and private debt seems likely to increase as well. High indebtedness could influence the effectiveness of monetary policy and lead to political pressure for the Federal Reserve to maintain low interest rates for an extended period of time.
Briefing
Putting the Beveridge Curve Back to Work
After the recession of 2007-09, the Beveridge curve seemed to shift significantly outward as the job-vacancy rate increased with no corresponding decrease in the unemployment rate. A new time-varying analysis of the Beveridge curve from the early 1950s through 2011 could lend support to the idea that skill mismatch due to technological change is the most likely driver of the curve's outward shifts, including its most recent movement. This analysis suggests that expansionary monetary policy has done little in recent years to reduce the unemployment rate.
Journal Article
Accounting for the non-employment of U.S. men, 1968-2010
We conduct an accounting exercise of the changes in aggregate employment, unemployment, and out of labor force (OLF) among 25?64-year-old men from 1968?2010. We decompose the observed changes in these labor market outcomes into changes in the sociodemographic composition of the population and changes in the labor market outcomes of different sociodemographic groups. Using the results of the decomposition, we predict that the OLF-to-population ratio for men will increase to 16 percent in 2015, up from 14.7 percent in 2010.
Working Paper
The shifting and twisting Beveridge curve: an aggregate perspective
One of the most striking aspects of the Great Recession in the United States is the persistently high level of unemployment despite an uptick in economic activity and an increased willingness by firms to hire. This has stimulated a debate on mismatch in the labor market. The argument is that despite the high unemployment rate the effective pool of job seekers is considerably smaller due to adverse effects of long-term unemployment, high unemployment benefits or structural change. Despite high vacancy postings, firms are therefore unable to hire desired workers. I study this issue from an ...
Journal Article
Time-Varying Parameter Vector Autoregressions: Specification, Estimation, and an Application
Time-varying parameter vector autoregressions (TVP-VARs) have become a popular tool to study the dynamics of macroeconomic time series. In this article, we discuss the specification and estimation of this class of models with a focus on implementability. We provide a step-by-step guide for researchers interested in utilizing this methodology in their own research. Specifically, we discuss how to use Bayesian Gibbs-sampling techniques to easily conduct inference.
Working Paper
Searching for Hysteresis
We search for the presence of hysteresis, which we dene as aggregate demand shocks that have a permanent impact on real GDP, in the U.S., the Euro Area, and the U.K. Working with cointegrated structural VARs, we nd essentially no evidence of such effects. Within a Classical statistical framework, it is virtually impossible to detect such shocks. Within a Bayesian context, the presence of these shocks can be mechanically imposed upon the data. However, unless a researcher is willing to impose the restriction that the sign of their long-run impact on GDP is the same for all draws, which amounts ...
Working Paper
What Inventory Behavior Tells Us About How Business Cycles Have Changed
Beginning in the mid-1980s, the nature of U.S. business cycles changed in important ways, as made evident by distinctive shifts in the comovement and relative volatilities of key economic aggregates. These include labor productivity, hours, output, and inventories. Unlike the widely documented change in absolute volatility over that period, known as the Great Moderation, these shifts in comovement and relative volatilities persist into the Great Recession. To understand these changes, we exploit the fact that inventory data are informative about sources of business cycles. Specifically, they ...