UNEMPLOYMENT AND AGGREGATE DEMAND IN SPAIN

• Authors: Čížek Ondřej
• Languages of publication: EN

Abstracts

EN

The paper contributes to the existing literature by incorporating the Keynesian principle of weak aggregate demand into the basic search-matching model of unemployment in a simple and novel way. Multiple equilibrium unemployment rates emerge as a result of this modification. It is shown that output demand not only plays short-term role but might be essential in the long-run as well. This is because the initial fall in aggregate demand may cause unemployment rate to converge to a higher (long-run) equilibrium. All these aspects are illustrated for the Spanish labour market and it is shown that the model with multiple equilibrium unemployment rates outperforms the baseline standard search and matching model in its forecasting performance as well as in its ability to describe huge persistent swings in unemployment.

Keywords

EN

SEARCH-MATCHING MODEL; UNEMPLOYMENT RATE; OUTPUT DEMAND; MULTIPLE EQUILIBRIA; SPAIN

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2017
• Volume: 65
• Issue: 5
• Pages: 459 – 481

Contributors

author

Čížek Ondřej

• University of Economics, Prague, Faculty of Informatics and Statistics, Department of Econometrics, W. Churchill Sq. 4, 130 67 Prague 3, Czech Republic