## New Evidenceon Cyclical and Structural Sources of Unemployment

_IMF Working Papers, May 1, 2011_

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## Bibliographic details
- Authors: Jinzhu Chen, Bharat Trehan, Prakash Kannan, Prakash Loungani
- Published: May 1, 2011
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455260416.001

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### Summary
- Cross-country evidence on the relative importance of cyclical and structural factors in explaining unemployment, including the sharp rise in U.S. long-term unemployment during the Great Recession of 2007-09.
- About 75% of the forecast error variance of unemployment is accounted for by cyclical factors—real GDP changes (?Okun‘s Law?), monetary and fiscal policies, and the uncertainty effects emphasized by Bloom (2009).
- Structural factors, measured using the dispersion of industry-level stock returns, account for the remaining 25 percent.
- For U.S. long-term unemployment the split between cyclical and structural factors is closer to 60-40, including during the Great Recession.

### Key findings and statistics
- 75%: Share of forecast error variance of unemployment attributed to cyclical factors (real GDP changes, monetary and fiscal policies, uncertainty effects).
- 25%: Share of forecast error variance of unemployment attributed to structural factors (measured by dispersion of industry-level stock returns).
- 60-40: Approximate cyclical-structural split for U.S. long-term unemployment, including during the Great Recession of 2007-09.

### Methodology and measures
- Cyclical factors: real GDP changes (Okun‘s Law), monetary policy, fiscal policy, and uncertainty effects (as emphasized by Bloom (2009)).
- Structural factors: proxied by the dispersion of industry-level stock returns (referred to as a dispersion or stock market dispersion index).

### Subjects and keywords
- Subjects: Asset prices, Financial markets, Labor, Prices, Stock markets, Structural unemployment, Unemployment, Unemployment rate.
- Keywords: aggregate unemployment equation, Asset prices, dispersion index, Dispersion shock, employment dispersion, index result, long-term unemployment, stock market dispersion index, stock markets, structural unemployment, structural unemployment rate, uncertainty, uncertainty index, unemployment, unemployment duration, unemployment fluctuation, Unemployment rate, unemployment rate shock, WP.

### Publication and authorship (from the content)
- By Jinzhu Chen, Bharat Trehan, Prakash Kannan, Prakash Loungani
- May 1, 2011
- Working Paper No. 2011/106
- Pages: 42
- DOI: https://doi.org/10.5089/9781455260416.001

*IMF Working Paper: "New Evidenceon Cyclical and Structural Sources of Unemployment" (Jinzhu Chen, Bharat Trehan, Prakash Kannan, Prakash Loungani, May 1, 2011).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/new-evidenceon-cyclical-and-structural-sources-of-unemployment-24832_