News shocks and labour market dynamics in matching models

Theodoridis, Konstantinos ORCID: https://orcid.org/0000-0002-4039-3895 and Zanetti, Francesco 2016. News shocks and labour market dynamics in matching models. Canadian Journal of Economics / Revue Canadienne d'Économique 49 (3) , pp. 906-930. 10.1111/caje.12218

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Abstract

We enrich a baseline real business cycle (RBC) model with search and matching frictions on the labour market and real frictions that are helpful in accounting for the response of macroeconomic aggregates to shocks. The analysis allows shocks to have an unanticipated and a news (i.e., anticipated) component. The Bayesian estimation of the model reveals that the model that includes news shocks on macroeconomic aggregates produces a remarkable fit of the data. News shocks in stationary and non‐stationary TFP, investment‐specific productivity and preference shocks significantly affect labour market variables and explain a sizeable fraction of macroeconomic fluctuations at medium‐ and long‐run horizons. Historically, news shocks have played a relevant role for output, but they have had a limited influence on unemployment.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Wiley
ISSN:	0008-4085
Last Modified:	24 Oct 2022 07:46
URI:	https://orca.cardiff.ac.uk/id/eprint/115873

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