Labor Supply Shocks, Labor Force Entry, and Monetary Policy
Author: Takushi Kurozumi
Publisher:
Published: 2022
Total Pages: 0
ISBN-13:
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Labor Force Participation and Monetary Policy in the Wake of the Great Recession
Author: Christopher J. Erceg
Publisher: International Monetary Fund
Published: 2013-12-16
Total Pages: 60
ISBN-13: 1484301455
DOWNLOAD EBOOKIn this paper, we provide compelling evidence that cyclical factors account for the bulk of the post-2007 decline in the U.S. labor force participation rate. We then proceed to formulate a stylized New Keynesian model in which labor force participation is essentially acyclical during “normal times” (that is, in response to small or transitory shocks) but drops markedly in the wake of a large and persistent aggregate demand shock. Finally, we show that these considerations can have potentially crucial implications for the design of monetary policy, especially under circumstances in which adjustments to the short-term interest rate are constrained by the zero lower bound.
The Response of Wages and Labor Supply Movements to Employment Shocks Across Europe and the United States
Author: Mr.Alun H. Thomas
Publisher: International Monetary Fund
Published: 1994-12-01
Total Pages: 27
ISBN-13: 1451857535
DOWNLOAD EBOOKThis paper assesses the responsiveness of wages and labor force movements to employment shocks across British and U.S. regions and across Europe using a multivariate vector autoregression technique. The paper finds inflexible real wages in all three areas in that each area’s real wage responds very little to employment shocks. However, the response of the labor force to employment shocks is much greater in the United States compared to Europe. The strong labor force response in the United States prevents any persistence in relative regional unemployment rates whereas the lack of mobility in Europe results in persistent unemployment rate differentials across British regions and European nations. Europe must therefore adopt measures to reduce barriers to immobility if it is to succeed in moderating the persistence in relative unemployment rates.
Labor Force Participation and Monetary Policy in the Wake of the Great Recession
Author: Christopher J. Erceg
Publisher:
Published: 2013
Total Pages: 53
ISBN-13:
DOWNLOAD EBOOKIn this paper, we provide compelling evidence that cyclical factors account for the bulk of the post-2007 decline in the U.S. labor force participation rate. We then proceed to formulate a stylized New Keynesian model in which labor force participation is essentially acyclical during "normal times" (that is, in response to small or transitory shocks) but drops markedly in the wake of a large and persistent aggregate demand shock. Finally, we show that these considerations can have potentially crucial implications for the design of monetary policy, especially under circumstances in which adjustments to the short-term interest rate are constrained by the zero lower bound.
Hysteresis in Labor Markets? Evidence from Professional Long-Term Forecasts
Author: Mr.John C Bluedorn
Publisher: International Monetary Fund
Published: 2019-05-24
Total Pages: 22
ISBN-13: 149831712X
DOWNLOAD EBOOKWe explore the long-term impact of economic booms on labor market outcomes using a novel approach based on revisions to professional forecasts over the past 30 years for 34 advanced economies. We find that when employment rises unexpectedly, forecasters typically raise their long-term forecasts of employment by more than one-for-one and also expect a strong rise in labor force participation, suggesting more persistent effects than is traditionally assumed. Economic booms associated with changes in aggregate demand, when inflation is rising and unemployment falling unexpectedly, also come with persistent long-term effects on expected employment and labor force participation, suggesting positive hysteresis. Our forecast evaluation tests indicate that forecasters are, on average, unbiased in their assessment of these positive, persistent effects.
The Labor Demand and Labor Supply Channels of Monetary Policy
Author: Sebastian Graves
Publisher:
Published: 2023
Total Pages: 0
ISBN-13:
DOWNLOAD EBOOKThe Labor Market and Economic Adjustment
Author: Pierre-Richard Agénor
Publisher: International Monetary Fund
Published: 1995-11-01
Total Pages: 98
ISBN-13: 1451854781
DOWNLOAD EBOOKThis paper examines the role of the labor market in the transmission process of adjustment policies in developing countries. It begins by reviewing the recent evidence regarding the functioning of these markets. It then studies the implications of wage inertia, nominal contracts, labor market segmentation, and impediments to labor mobility for stabilization policies. The effect of labor market reforms on economic flexibility and the channels through which labor market imperfections alter the effects of structural adjustment measures are discussed next. The last part of the paper identifies a variety of issues that may require further investigation, such as the link between changes in relative wages and the distributional effects of adjustment policies.
Monetary Policy and Labor Supply
Author: Patrick Burke
Publisher:
Published: 2022
Total Pages: 0
ISBN-13:
DOWNLOAD EBOOKThe first chapter gives an overview of the current literature on participation in the labor market. Special attention is paid to trends in participation since 2000. The role of demographic change in those trends is compared against other explanations. With the increasing focus on labor market participation at the United States Federal Reserve, the history of monetary policy changes and participation is also examined. The second chapter estimates a labor market matching model to get a more accurate measure of the market tightness elasticity of the job finding rate and unexplained residual. The estimation strategy in the second chapter follows the approach in Borowczyk-Martins et al. (2013) which models the autocorrelation structure of the unobserved component in the matching function to address simultaneity bias. This chapter then uses asset data present in the Survey of Income and Program Participation. This allows for the use of average household debt as an additional instrument to correct for measurement error. These results help characterize the recent shifts in the Beveridge curve and the decline of the matching rate between job seekers and job openings between 2008-2013. How important is labor supply for the ability of monetary policy to influence inflation and employment? Hiring costs alter the response of inflation to monetary policy. As shown in Kurozumi and Van Zandweghe (2010), adjustments in employment can make it difficult for monetary policy to reach its price stability and full employment targets. As the policy response is more vigorous in maintaining inflation around a target, that target becomes impossible to maintain. Recent fluctuations in the participation rate have led to a growing concern about the role of labor supply in monetary policy. This chapter shows that as labor supply becomes more elastic, the monetary authority is more likely to be able to stabilize the economy around its steady state targets. The central bank's response to cyclical unemployment is important for price level stability regardless of business cycle goals. Journal of Economic Literature codes: E12 E24 E31 E32 E52.
Labor Supply Factors and Economic Fluctuations
Author: Claudia Foroni
Publisher:
Published: 2018
Total Pages: 0
ISBN-13:
DOWNLOAD EBOOKWe propose a new Vector Autoregressive identification scheme that enables us to disentangle labor supply shocks from wage bargaining shocks. Identification is achieved by imposing sign restrictions on the responses of the unemployment rate and the labor force participation rate to the two shocks. According to our analysis on United States data over the period 1985-2014, labor supply shocks and wage bargaining shocks are important drivers of output and unemployment both in the short run and in the long run. These results suggest that identification strategies used in estimated new Keynesian models to disentangle labor market shocks may be misguided.
Labor Markets and Business Cycles
Author: Robert Shimer
Publisher: Princeton University Press
Published: 2010-04-12
Total Pages: 189
ISBN-13: 1400835232
DOWNLOAD EBOOKLabor Markets and Business Cycles integrates search and matching theory with the neoclassical growth model to better understand labor market outcomes. Robert Shimer shows analytically and quantitatively that rigid wages are important for explaining the volatile behavior of the unemployment rate in business cycles. The book focuses on the labor wedge that arises when the marginal rate of substitution between consumption and leisure does not equal the marginal product of labor. According to competitive models of the labor market, the labor wedge should be constant and equal to the labor income tax rate. But in U.S. data, the wedge is strongly countercyclical, making it seem as if recessions are periods when workers are dissuaded from working and firms are dissuaded from hiring because of an increase in the labor income tax rate. When job searches are time consuming and wages are flexible, search frictions--the cost of a job search--act like labor adjustment costs, further exacerbating inconsistencies between the competitive model and data. The book shows that wage rigidities can reconcile the search model with the data, providing a quantitatively more accurate depiction of labor markets, consumption, and investment dynamics. Developing detailed search and matching models, Labor Markets and Business Cycles will be the main reference for those interested in the intersection of labor market dynamics and business cycle research.
