unemployment. The standard model can generate sufficiently large cyclical fluctuations in unemployment, or a sufficiently small … response of unemployment to labor market policies, but it cannot do both. Variable search and separation, finite UI benefit …

We construct and calibrate a general equilibrium business cycle model with unemployment and precautionary saving. We …' income riskier, both by increasing the unconditional probability of unusually long unemployment spells, and by making wages … fiscal policy offsets the cycle, holding unemployment benefits constant but varying the tax rate procyclically to smooth …