Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances? A Vector Autoregression Approach
Applied Economics Letters
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.
Taylor & Francis
Caporale, Tony; Doroodian, Khosrow; and Abeyratne, M.R.M., "Cyclical Unemployment: Sectoral Shifts or Aggregate Disturbances? A Vector Autoregression Approach" (1996). Economics and Finance Faculty Publications. 21.