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Working hard in the wrong place: a mismatch-based explanation to the UK productivity puzzle
The UK experienced an unusually prolonged stagnation in labor productivity in the aftermath of the Great Recession. This paper analyzes the role of sectoral labor misallocation in accounting for this ?productivity puzzle.? If jobseekers disproportionately search for jobs in sectors where productivity is relatively low, hires are concentrated in the wrong sectors and the post-recession recovery in aggregate productivity can be slow. Our calculations suggest that, quantified at the level of three-digit occupations, this mechanism can explain up to two-thirds of the deviations from trend-growth ...
Why Is the Job-Finding Rate Still Low?
Fluctuations in unemployment are mostly driven by fluctuations in the job-finding prospects of unemployed workers?except at the onset of recessions, according to various research papers (see, for example, Shimer [2005, 2012] and Elsby, Hobijn, and Sahin ). With job losses back to their pre-recession levels, the job-finding rate is arguably one of the most important indicators to watch. This rate?defined as the fraction of unemployed workers in a given month who find jobs in the consecutive month?provides a good measure of how easy it is to find jobs in the economy. The chart below ...
The Macroeconomic Effects of Forward Guidance
In this post, we quantify the macroeconomic effects of central bank announcements about future federal funds rates, or forward guidance. We estimate that a commitment to lowering future rates below market expectations can have fairly strong effects on real economic activity with only small effects on inflation.
Job search behavior over the business cycle
We create a novel measure of job search effort starting in 1994 by exploiting the overlap between the Current Population Survey and the American Time Use Survey. We examine the cyclical behavior of aggregate job search effort using time series and cross-state variation and find that it is countercyclical. About half of the countercyclical movement is explained by a cyclical shift in the observable characteristics of the unemployed. Individual responses to labor market conditions and drops in wealth are important in explaining the remaining variation.
The forward guidance puzzle
With short-term interest rates at the zero lower bound, forward guidance has become a key tool for central bankers, and yet we know little about its effectiveness. This paper first empirically documents the impact of forward guidance announcements on a broad cross section of financial markets data and professional forecasts. We find that Federal Open Market Committee (FOMC) announcements containing forward guidance had heterogeneous effects depending on the other content of the statement. We show that once we control for these other elements, forward guidance had, on average, positive and ...