Revisiting the Hypothesis of High Discounts and High Unemployment
Bibliographic Data
| ID | 9704035 |
|---|---|
| Authors | Paolo Martellini (FRB Minneapolis, USA), Guido Menzio (0000-0003-0280-8778, NYU & NBER, USA, corresponding author), Ludo Visschers (0000-0001-5525-2051, University of Edinburgh) |
| Year | 2021 |
| Volume | 131 |
| Issue | 637 |
| Pages | 2203-2232 |
| Publication date | 2021-07-02 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (PUBLISHER • GB) |
| DOI | 10.1093/ej/ueaa138 |
| OpenAlex | W2973000561 |
| Language | EN |
| Citations received | 1 |
| References cited | 26 |
We revisit the hypothesis that cyclical fluctuations in unemployment are caused by shocks to the discount rate. We use a simple but rich search-theoretic model of the labour market in which the UE, EU and EE rates are all endogenous. Analytically, we show that an increase in the discount rate lowers the UE rate and, under some natural conditions, it lowers the EU rate. Quantitatively, we show that an increase in the discount rate from 4% to 10% generates a 3.5% decline in the UE rate and a 6% decline in the EU rate. These findings are at odds with the actual behaviour of the US labour market over the business cycle, which features a negative comovement between the UE and EU rates
Business cycle · Econometrics · Economics · European union · International economics · Keynesian economics · Macroeconomics · Member states · Monetary economics · Natural rate of unemployment · Odds · Unemployment · Unemployment rate · Economic theories and models · Labor market dynamics and wage inequality · Monetary Policy and Economic Impact
Job Creation and Job Destruction in the Theory of Unemployment
Wage Differentials, Employer Size, and Unemployment
Reassessing the ins and outs of unemployment
The Cyclical Behavior of Equilibrium Unemployment and Vacancies
Time to Build and Aggregate Fluctuations
Wage Bargaining with On-the-Job Search
Zero Bound on Interest Rates and Optimal Monetary Policy
Equilibrium Wage Dispersion with Worker and Employer Heterogeneity
The Production of Human Capital and the Life Cycle of Earnings
Shopping Externalities and Self-Fulfilling Unemployment Fluctuations
Life Cycle Wage Growth across Countries
Efficient Search on the Job and the Business Cycle
Debt Constraints and Employment
| Unique citing works | 1 |
|---|---|
| Citations per year | 0,25 |
| Citation span | 2022 - 2022 (1) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 1 |