Working Paper: NBER ID: w18085
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: GDP; employment; business cycles; recoveries
JEL Codes: E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| recent recoveries (Y10) | slower growth rates of employment (J69) |
| recent recoveries (Y10) | slower growth rates of GDP (F69) |
| risk premium shocks (G19) | GDP growth (O49) |
| investment shocks (E22) | GDP growth (O49) |
| wage markup shocks (J39) | GDP growth (O49) |
| monetary policy shocks (E39) | GDP growth (O49) |
| demand shocks (E39) | GDP growth (O49) |
| risk premium shocks (G19) | slower recoveries (E65) |
| investment shocks (E22) | slower recoveries (E65) |
| adverse wage markup shocks (F66) | slower recoveries (E65) |
| monetary policy shocks (E39) | slower recoveries (E65) |
| nature of demand shocks (E32) | slower recoveries (E65) |
| GDP (E20) | employment (J68) |