PERSISTENCE AND VOLATILITY OF BEVERIDGE CYCLES |
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| Authors: | Florian Sniekers |
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| Affiliation: | Utrecht University, the NetherlandsComments by Bj?rn Brügemann, Bruno Decreuse, Cees Diks, Mike Elsby, Wouter den Haan, Cars Hommes, Kiminori Matsuyama, Guido Menzio, Vincent Sterk, two anonymous referees, and seminar participants at the UvA, VU, TI, CEF 2013 Vancouver, EEA 2013 Gothenburg, SNDE 2015 Oslo, SaM Workshop Bristol, and SaM 2016 Amsterdam are gratefully acknowledged. I am also grateful for financial support by the Netherlands Organisation for Scientific Research (NWO). I am most indebted to Jan Tuinstra and Pieter Gautier for guidance and constructive criticism, and to Florian Wagener for help with bifurcation theory. |
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| Abstract: | This article explains the cyclical behavior of the fluctuations in unemployment and vacancies by demand externalities. Adding such externalities to an otherwise standard search and matching model reduces the need for exogenous shocks in explaining these fluctuations. Under plausible parameter values, the equilibrium dynamics include a stable limit cycle that resembles the empirically observed counterclockwise cycles around the Beveridge curve. Calibrated to the duration of the business cycle, these endogenous “Beveridge cycles” are as persistent as the data, without losing any of the amplification of the standard model. |
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