Working Paper: CEPR ID: DP8978
Authors: Jordi Gal; Frank Smets; Rafael Wouters
Abstract: An analysis of the performance of GDP, employment and other labor market variables following the troughs in postwar U.S. business cycles points to much slower recoveries in the three most recent episodes, but does not reveal any significant change over time in the relation between GDP and employment. This leads us to characterize the last three episodes as slow recoveries, as opposed to jobless recoveries. We use the estimated New Keynesian model in Galí-Smets-Wouters (2011) to provide a structural interpretation for the slower recoveries since the early nineties.
Keywords: Estimated DSGE Models; Jobless Recoveries; Okun's Law; US Business Cycle
JEL Codes: E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| risk premium shocks (G19) | speed of recoveries (C41) |
| investment shocks (E22) | speed of recoveries (C41) |
| downward wage rigidities (J31) | speed of recoveries (C41) |
| adverse monetary policy shocks (E39) | speed of recoveries (C41) |
| risk premium shocks (G19) | contributions to speed of recoveries (E20) |
| investment shocks (E22) | contributions to speed of recoveries (E20) |
| adverse wage markup (J31) | speed of recoveries (C41) |