We construct and estimate a business cycle model with search and matching frictions in the labor market and in the product market. We show that the dynamic structure of the model and the endogenous job separation rate are important to accurately represent the empirical responses to the technology and the demand shocks. Our main finding is that the demand shock explains at least 58% of the unemployment fluctuations in the US, while the technology shock accounts for the residual.
Bibliographical noteFunding Information:
This work was supported by the Polish National Science Center ( Narodowe Centrum Nauki ) grant no. 2014/15/N/HS4/01342 .
- ECON Macroeconomics
- technology shocks
- demand shocks
- business cycles