Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296296 
Year of Publication: 
2022
Citation: 
[Journal:] Quantitative Economics [ISSN:] 1759-7331 [Volume:] 13 [Issue:] 3 [Year:] 2022 [Pages:] 1101-1143
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
Hiring is a costly activity reflecting firms' investment in their workers. Microdata show that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We outline a mechanism based on cyclical markup fluctuations, placing emphasis on hiring frictions interacting with price frictions. This mechanism generates strong propagation and amplification of all key macroeconomic variables in response to technology shocks and mutes the traditional transmission of monetary policy shocks. A local projection analysis of aggregate U.S. data shows that the empirical results, including the cyclicality of markups, are consistent with the model's impulse response functions.
Subjects: 
Business cycles
propagation and amplification
markup cyclicality
hiring as investment
intertemporal allocation
confluence of hiring and price frictions
JEL: 
E22
E24
E32
E52
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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