Uncertainty and Unemployment: The Effects of Aggregate and Sectoral Channels
IMF Working Papers, February 23, 2015
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- Uncertainty and Unemployment: The Effects of Aggregate and Sectoral Channels
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Bibliographic details
- Authors: Sangyup Choi, Prakash Loungani
- Published: February 23, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498356305.001
Research question and methodology
- Objective: Study the role of uncertainty shocks in explaining unemployment dynamics, separating aggregate and sectoral channels.
- Data: S&P500 data from the first quarter of 1957 to third quarter of 2014.
- Measurement: Construct separate indices to measure aggregate uncertainty and sectoral uncertainty.
- Empirical approach: Compare effects on the unemployment rate in a standard macroeconomic vector autoregressive (VAR) model.
Key findings
- Aggregate uncertainty:
- Leads to an immediate increase in unemployment.
- The impact dissipates within a year.
- Sectoral uncertainty:
- Has a long-lived impact on unemployment.
- Peak impact occurs after two years.
- Interpretation:
- Results are consistent with aggregate uncertainty operating through a “wait-and-see” mechanism.
- Increased sectoral uncertainty raises unemployment by requiring greater reallocation across sectors.
Study metadata and classification
- Authors: Sangyup Choi, Prakash Loungani
- Publication date: February 23, 2015
- Series: Working Paper No. 2015/036
- Issue: 036
- Volume: 2015
- Pages: 26
- DOI: https://doi.org/10.5089/9781498356305.001
- ISBN: 9781498356305
- ISSN: 1018-5941
- Subjects: Financial crises; Financial markets; Global financial crisis of 2008-2009; Labor; Labor markets; Stock markets; Unemployment; Unemployment rate; Vector autoregression
- Keywords: aggregate uncertainty; cross-industry volatility; deviation from the baseline; Global financial crisis of 2008-2009; Great Recession; labor market; Labor markets; long-term unemployment; long-term unemployment rate; sectoral uncertainty; stock market; Stock markets; uncertainty affect unemployment; uncertainty index; unemployment; unemployment fluctuation; Unemployment rate; WP
IMF Working Paper — "Uncertainty and Unemployment: The Effects of Aggregate and Sectoral Channels" by Sangyup Choi and Prakash Loungani (Working Paper No. 2015/036).
Content in this bundle
- _wp1536 — Uncertainty Shocks and U.S. Unemployment