Title

Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances? A Vector Autoregression Approach

Document Type

Article

Publication Date

1996

Publication Source

Applied Economics Letters

Abstract

Using a multivariate vector autoregression (VAR) model, this paper investigates if sectoral shifts, inflation uncertainty, or demand shocks are the primary cause of unemployment fluctuations in the postwar U.S. economy. A sectoral shifts variable (cross-section volatility), an ARCH measure of inflation uncertainty, and three demand shocks variables (monetary base growth rate, interest rates and inflation rates) are incorporated in a VAR model. Our major findings are: cross-section volatility Granger causes unemployment; the sectoral shifts variable and inflation uncertainty explain a small amount, while demand shocks variables explain a substantial amount of the variation in unemployment.

Inclusive pages

127-130

ISBN/ISSN

1350-5851

Publisher

Taylor & Francis

Volume

3

Issue

2

Peer Reviewed

yes