This paper presents a reappraisal of unemployment movements in the European Union. Our analysis is based on the chain reaction theory of unemployment, which focuses on (a) the interaction among labor market adjustment processes, (b) the interplay between these adjustment processes and the...

Although oil price shocks have long been viewed as one of the leading candidates for explaining U.S. recessions, surprisingly little is known about the extent to which oil price shocks explain recessions. We provide a formal analysis of this question with special attention to the possible role...

This paper aims to shed light on the importance of health considerations for business cycle fluctuations and the effect of health status on labour productivity and availability of labour input for productive use. To this end, Grossman's (2000) partial‐equilibrium framework with endogenous...

Typically real-business-cycle models are assessed by their ability to mimic the covariances and variances of actual business cycle data. Recently, however, advocates of RBC models have used them to fit the historical path of real GDP using the Solow residual as a driving process. We demonstrate...

This paper presents a reappraisal of unemployment movements in the European Union. Our analysis is based on the chain reaction theory of unemployment, which focuses on (a) the interaction among labor market adjustment processes, (b) the interplay between these adjustment processes and the...

We show that when a model has more shocks than observed variables the estimated filtered and smoothed shocks will be correlated. This is despite no correlation being present in the data generating process. Additionally the estimated shock innovations may be autocorrelated. These correlations...

The highly dynamic nature of the COVID-19 crisis poses an unprecedented challenge to policy makers around the world to take appropriate income-stabilizing countermeasures. To properly design such policy measures, it is important to quantify their effects in real-time. However, data on the...

Detrending within structural vector autoregressions (SVAR) is directly linked to the shock identification. We investigate the consequences of trend misspecification in an SVAR using both standard real business cycle models and bi-variate SVARs as data generating processes. Our bias decomposition...

This paper shows how to use the Kalman filter (Kalman 1960) to back out the shocks of a dynamic stochastic general equilibrium model. In particular, we use the smoothing algorithm as described in Hamilton (1994) to estimate the shocks of a sticky-prices and sticky-wages model using all the...