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Sectoral Shocks and Unemployment Rate Fluctuations

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  • Carlos G. Elías

Abstract

In some Real Business Cycle (RBC) models it is possible to generate comovement between production of different sectors even if shocks are sector specific. Although this simulates a common feature of actual business cycles, it is not in itself evidence that business cycles are actually driven by an RBC phenomenon. In this paper, a Vector Autoregressive model is estimated. Variance decomposition analysis suggests that sectoral shocks are an important determinant of unemployment rate fluctuations. However, this does not rule out the importance of aggregate fluctuations, especially during the first year after the shock.

Suggested Citation

  • Carlos G. Elías, 1998. "Sectoral Shocks and Unemployment Rate Fluctuations," The American Economist, Sage Publications, vol. 42(2), pages 65-72, October.
    • Handle: RePEc:sae:amerec:v:42:y:1998:i:2:p:65-72
    DOI: 10.1177/056943459804200206
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