Using the restrictions could lead us to underestimate the amount of cyclical unemployment
(see Appendix A for further details).
One may argue that structural unemployment and cyclical unemployment
call for different types of policy responses.
On the other hand, Boeri and Jimeno (2015) argue that long-term trends and the long lasting effects of the crisis on the relationship among macroeconomic variables make it more and more difficult to disentangle structural and cyclical unemployment
, and, in fact, the several measures of structural unemployment, however defined, just fluctuate too much over time to qualify for being considered as structural.
US cyclical unemployment
performance has at least been decent by the standards of its peers, then.
(a push factor for business ownership) and lagged self-employment (a factor included for capturing the inertia) are the two explanatory variables Included In the benchmark specification.
where [u.sup.c.sub.t] is cyclical unemployment
, [y.sup.c.sub.t] is cyclical output and [[epsilon].sub.t] is a white-noise disturbance term.
(Diamond, 2013; Miyamoto, 2011; Min Zhang, 2008) can be caused by many different circumstances.
arises from changes in the economy related to the business cycle: as the economy expands, companies produce more goods and hire more employees, and the unemployment rate declines.
Structural unemployment develops for different reasons than cyclical unemployment
. Structural unemployment results when jobseekers do not move quickly into vacant jobs.
In fact, the low cyclical LFP rate is seen as keeping the cyclical unemployment
rate from being even higher, because poor employment prospects have induced discouraged unemployed workers to leave the labor force and have prevented marginally attached inactive participants from a return to the job search.
In an earlier article (Garrison 2009), I argued that the Federal Reserve's implicit observance of the Taylor Rule, according to which policymakers split the difference in various proportions between reducing cyclical unemployment
and constraining inflation to some target rate (customarily 2 percent), was an ill-fated exercise in learning-by-doing.
Indeed, the current imbalance in the labor market may in fact have been caused by the most severe consequences of the global crisis in B&H: the creation of both structural and cyclical unemployment
. The characteristics of structural (long-term) unemployment and cyclical (short-term) unemployment imply a substantial cost to the unemployed individuals themselves as well as a significant loss of potential output to the country on the macroeconomic level.