Using the parameter values in Table 1, calculate the steady-state values of labor market tightness θ, unemployment rate u and vacancy rate v. Suppose the economy is initially in steady state (t = 0). At t = 1, a recession causes the value of filled jobs J to decrease to J = 2 for 15 months. Starting from the steady state, use the other parameter values in Table 1 and a spreadsheet/script to calculate and plot the time paths of market tightness, unemployment rate and vacancy rate for 15 months (t = 0,1,...,15) after the economy was hit by the recession. Describe how market tightness, unemployment rate and vacancy rate respond to the decrease in J. Has the economy settled to a new equilibrium by the end of 15 months? Explain your findings. Now Some economists believe that the matching process becomes less efficient in recessions, as indicated by the shifting out of the Beveridge curve. Suppose the economy is initially in steady state. At t = 1, a recession causes the matching efficiency parameter A to decrease to A = 0.5 for 15 months. Starting from the steady state, use the other parameter values in Table 1 and a spreadsheet/script to calculate and plot the time paths of market tightness, unemployment rate and vacancy rate for 15 months (t = 0,1,...,15) after the economy was hit by the recession. Describe how market tightness, unemployment rate and vacancy rate respond to the decrease in A. Has the economy settled to a new equilibrium by the end of 15 months? Explain your findings.
Using the parameter values in Table 1, calculate the steady-state values of labor market tightness θ,
Suppose the economy is initially in steady state (t = 0). At t = 1, a recession causes the value of filled jobs J to decrease to J = 2 for 15 months. Starting from the steady state, use the other parameter values in Table 1 and a spreadsheet/script to calculate and plot the time paths of market tightness, unemployment rate and vacancy rate for 15 months (t = 0,1,...,15) after the economy was hit by the recession. Describe how market tightness, unemployment rate and vacancy rate respond to the decrease in J. Has the economy settled to a new equilibrium by the end of 15 months? Explain your findings.
Now Some economists believe that the matching process becomes less efficient in recessions, as indicated by the shifting out of the Beveridge curve. Suppose the economy is initially in steady state. At t = 1, a recession causes the matching efficiency parameter A to decrease to A = 0.5 for 15 months. Starting from the steady state, use the other parameter values in Table 1 and a spreadsheet/script to calculate and plot the time paths of market tightness, unemployment rate and vacancy rate for 15 months (t = 0,1,...,15) after the economy was hit by the recession. Describe how market tightness, unemployment rate and vacancy rate respond to the decrease in A. Has the economy settled to a new equilibrium by the end of 15 months? Explain your findings.
Step by step
Solved in 4 steps
