NBER Publications by Ryan Michaels

Much recent research has sought to explain the cyclical amplitude of unemployment fluctuations in the US. This paper shows that amplification of the cyclical variation of unemployment can be obtained from adding two very simple features to an otherwise standard model of the aggregate labor market, namely downward sloped short run labor demand and endogenous job destruction. This generalized model is able to match more closely the cyclicality of both job finding and employment to unemployment flows observed in US data. Contrary to standard models, the model can generate amplification while maintaining realistic surplus to employment relationships. In addition, we uncover a novel source of amplification of cyclical shocks that is generated by the interaction of countercyclical unemployment i...

This paper analyzes the role of transparency and credibility in accounting for the widely divergent macroeconomic effects of three episodes of deliberate monetary contraction: the post-Civil War deflation, the post-WWI deflation, and the Volcker disinflation. Using a dynamic general equilibrium model in which private agents use optimal filtering to infer the central bank's nominal anchor, we demonstrate that the salient features of these three historical episodes can be explained by differences in the design and transparency of monetary policy, even without any time variation in economic structure or model parameters. For a policy regime with relatively high credibility, our analysis highlights the benefits of a gradualist approach (as in the 1870s) rather than a sudden change in policy (a...

One of the strongest trends in recent macroeconomic modeling of labor market fluctuations is to treat unemployment inflows as acyclical. This trend stems in large part from an influential paper by Shimer on "Reassessing the Ins and Outs of Unemployment," i.e., the extent to which increased unemployment during a recession arises from an increase in the number of unemployment spells versus an increase in their duration. After broadly reviewing the previous literature, we replicate and extend Shimer's main analysis. Like Shimer, we find an important role for increased duration. But contrary to Shimer's conclusions, we find that even his own methods and data, when viewed in an appropriate metric, reveal an important role for increased inflows to unemployment as well. This finding is furth...