Template-type: ReDIF-Paper 1.0
Author-Name: Chun-Hung Kuo
Author-Name-First: Chun-Hung
Author-Name-Last: Kuo
Author-Email: chkuo@iuj.ac.jp
Author-Workplace-Name: International University of Japan
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Author-Name: Hiroaki Miyamoto
Author-Name-First: Hiroaki
Author-Name-Last: Miyamoto
Author-Email: miyamoto@pp.u-tokyo.ac.jp
Author-Workplace-Name: The University of Tokyo
Author-Workplace-Homepage: http://www.u-tokyo.ac.jp/en/
Title: Fiscal Stimulus and Unemployment Dynamics
Abstract: Focusing on both hiring and firing margins, this paper revisits effects of fiscal expansion on unemployment. We provide evidence that an increase in government spending increases the job finding rate and reduces the separation rate, lowering unemployment in the U.S. by using a structural VAR model. We then develop a DSGE model with search frictions where job separation is endogenously determined. Our model can capture the empirical pattern of responses of the job finding, separation, and unemployment rates to a government spending shock. We also demonstrate that model's predictions are in contrast with earlier studies that assume exogenous separation.
Classification-JEL: E24; E62; J64
Length: 28 pages
Creation-Date: 2014-05
Number: EMS_2014_05
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2014_05.pdf
File-Format: Application/pdf
File-Function: First version, 2014
File-Size: 380KB
Keywords: Fiscal Policy, Unemployment, Labor market, Search and matching, Endogenous separation
Handle: RePEc:iuj:wpaper:EMS_2014_05