Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249858 
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 2021-22
Publisher: 
Federal Reserve Bank of Atlanta, Atlanta, GA
Abstract: 
Ljungqvist and Sargent (2017) (LS) show that unemployment fluctuations can be understood in terms of a quantity they call the "fundamental surplus." However, their analysis ignores risk premia, a force that Hall (2017) shows is important in understanding unemployment fluctuations. We show how the LS framework can be adapted to incorporate risk premia. We derive an equivalence result that relates parameters in economies with risk premia to those of an artificial economy without risk premia. We show how to use properties of the artificial economy to deduce how risk premia affect unemployment dynamics in the original economy.
Subjects: 
risk premia
fundamental surplus
time-varying discounts
unemployment fluctuations
JEL: 
E23
E24
E32
E44
J23
J24
J31
J41
J63
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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