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Can the Mortensen-Pissarides Matching Model Match the Business Cycle Facts?

Staff Report 224 | Published December 1, 1996

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Can the Mortensen-Pissarides Matching Model Match the Business Cycle Facts?

Abstract

We examine whether the Mortensen-Pissarides matching model can account for the business cycle facts on employment, job creation, and job destruction. A novel feature of our analysis is its emphasis on the reduced-form implications of the matching model. Our main finding is that the model can account for the business cycle facts, but only if the average duration of a nonemployment spell is relatively high—about nine months or longer.


Published In: International Economic Review (Vol. 40, No. 4, November 1999, pp. 933-959) https://doi.org/10.1111/1468-2354.00048

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