Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195550
Authors: 
Petrosky-Nadeau, Nicolas
Zhang, Lu
Year of Publication: 
2017
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 8 [Year:] 2017 [Issue:] 2 [Pages:] 611-650
Abstract: 
An accurate global projection algorithm is critical for quantifying the basic moments of the Diamond-Mortensen-Pissarides model. Log linearization under- states 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.
Subjects: 
Search frictions
unemployment
projection
perturbation
nonlinear dynamics
parameterized expectations
finite elements
JEL: 
E24
E32
J63
J64
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/4.0/
Document Type: 
Article

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