Ljungqvist and Sargent (2017) (LS) show that unemployment fluctuations can be understood in terms of a quantity they call the "fundamental surplus." However, their analysis ignores risk premia, a force that Hall (2017) shows is important in understanding unemployment fluctuations. We show how...

We reassess the role of vacancies in a Diamond-Mortensen-Pissarides style search and matching model. In the absence of free entry long lived vacancies and endogenous separations give rise to a vacancy depletion channel which we identify via joint unemployment and vacancy dynamics. We show...

We reassess the role of vacancies in a Diamond-Mortensen-Pissarides style search and matching model. In the absence of free entry long lived vacancies and endogenous separations give rise to a vacancy depletion channel which we identify via joint unemployment and vacancy dynamics. We show...

We reassess the role of vacancies in a Diamond-Mortensen-Pissarides style search and matching model. In the absence of free entry long lived vacancies and endogenous separations give rise to a vacancy depletion channel which we identify via joint unemployment and vacancy dynamics. We show...

We provide a dynamic extension of an economy with search on credit and labor markets (Wasmer and Weil, 2004). Financial frictions create volatility: they add an additional, almost acyclical, entry cost to procyclical job creation costs, thus increasing the elasticity of labor market tightness to...

We propose a measure for the importance of aggregate shocks for fluctuations in job flows at the firm level. Using data for the Portuguese economy, we find that large and old firms exhibit higher relative sensitivity to aggregate shocks and have a disproportional influence over the dynamics of...

This paper connects two salient economic features: (i) Fiscal shocks have asymmetric effects across business cycle phases (Gechert et al., 2019); (ii) Okun's coefficient is time varying and may be unstable. The intertwined dynamic behavior of fiscal shocks and unemployment-output trade-offs are...

Shimer (2015) argues that a search and matching model of the labor market in which wage is determined by Nash bargaining cannot generate the observed volatility in unemployment and vacancy in response to reasonable labor productivity shocks. This paper examines how incorporating monopolistically...

Shimer (2015) argues that a search and matching model of the labor market in which wage is determined by Nash bargaining cannot generate the observed volatility in unemployment and vacancy in response to reasonable labor productivity shocks. This paper examines how incorporating monopolistically...

In a reasonably calibrated Mortensen and Pissarides matching model, shocks to average labor productivity can account for only a small portion of the fluctuations in unemployment and vacancies (Shimer (2005a)). In this paper, the author argues that if vintage specific shocks rather than aggregate...