Solving the Diamond-Mortensen-Pissarides model accurately

• 成果类型: Article
• 署名作者: Petrosky-Nadeau, Nicolas; Zhang, Lu
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - San Francisco; University System of Ohio; Ohio State University; National Bureau of Economic Research
• 刊物名称: QUANTITATIVE ECONOMICS
• ISSN/ISSBN: 1759-7331
• DOI: 10.3982/QE452
• 发表日期: 2017
• 页码: 611-650
• 关键词: Search frictions; unemployment; projection; perturbation; nonlinear dynamics; parameterized expectations; finite elements

摘要

An accurate global projection algorithm is critical for quantifying the basic moments of the Diamond-Mortensen-Pissarides model. Log linearization understates the mean and volatility of unemployment, but overstates the volatility of labor market tightness and the magnitude of the unemployment-vacancy correlation. Log linearization also understates the impulse responses in unemployment in recessions, but overstates the responses in the market tightness in booms. Finally, the second-order perturbation in logs can induce severe Euler equation errors, which are often much larger than those from log linearization.