Islas-Camargo, Alejandro and Cortez, Willy W. (2011): How relevant is monetary policy to explain Mexican unemployment fluctuations?
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In this paper we analyze the effects of a monetary policy shock on Mexican unemployment rates. Unlike previous studies we re-estimate unemployment rates so that these alternative rates are comparable to those of the OECD member countries. We find that in response to tightening monetary policy, unemployment increases with a characteristic hump-shaped pattern found in other studies. Our empirical results indicate that unemployment elasticity is low and yet the velocity of adjustment to return to the initial point is rather high. We interpret these findings as being the result of two characteristics of Mexico’s labor market: (i) high labor regulation (which includes labor intervention in hiring-firing decisions), and (ii) the existence of a large informal sector and low enforcement of labor regulation.
|Item Type:||MPRA Paper|
|Original Title:||How relevant is monetary policy to explain Mexican unemployment fluctuations?|
|Keywords:||unemployment rates; structural VAR; monetary policy; Mexico|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C32 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
|Depositing User:||Willy W. Cortez|
|Date Deposited:||10. Apr 2011 08:24|
|Last Modified:||04. Jan 2016 09:16|
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