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Is euro area at full employment ? — A diagnosis from the Beveridge curve

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  • Leythienne, Jean Fernand

Abstract

We propose a simple and robust method to assess if an economy is at full employment, in real time. For this purpose, we first prove that the Beveridge curve is a rectangular hyperbola with one single parameter equal to the square of the mismatch unemployment rate. We apply this equation to obtain a breakdown of the unemployment rate in the euro area and to study how mismatch unemployment and the unemployment gap were impacted by the great recession, the sovereign debt crisis and the COVID-19 pandemics. We finally analyse how disparities in job vacancy rates across countries affect the overall matching at euro area level and derive recommendations for economic policy.

Suggested Citation

  • Leythienne, Jean Fernand, 2024. "Is euro area at full employment ? — A diagnosis from the Beveridge curve," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 322-340.
    • Handle: RePEc:eee:ecanpo:v:81:y:2024:i:c:p:322-340
    DOI: 10.1016/j.eap.2023.10.003
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    References listed on IDEAS

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    More about this item

    Keywords

    Labour market; Beveridge curve; Unemployment; Job vacancy statistics; Macroeconomics; European Union;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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