Research webinar - Nathaniel Throckmorton (College of William and Mary) - Entry and Exit, Unemployment, and the Business Cycle

Research webinar - Nathaniel Throckmorton (College of William and Mary) - Entry and Exit, Unemployment, and the Business Cycle

Co-authors: Joshua Bernstein (Indiana University) and Alexander Richter (Federal Reserve Bank of Dallas) 

Abstract 

This paper augments a real business cycle model with two salient features of the data—establishment entry and exit and search and matching frictions— and examines their joint effect on business cycle dynamics. Analytical results show their interaction amplifies and skews the transmission of aggregate shocks, resulting in non-Gaussian dynamics. The calibrated model features state-dependent dynamics. As a consequence, the model generates data-consistent non-normalities in real activity and unemployment, counter-cyclical endogenous uncertainty, and significantly higher welfare costs of business cycles than models that are close to normal.

https://nathrockmorton.people.wm.edu/

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