Board of Governors of the Federal Reserve System (U.S.)
Finance and Economics Discussion Series
Fluctuations in upside risks to unemployment over the medium term are examined using quantile regressions. U.S. experience reveals an elevated risk of large increases in unemployment when inflation or credit growth is high and when the unemployment rate is low. Inflation was a significant contributor to unemployment risk in the 1970s and early 1980s, and fluctuations in credit have contributed importantly to unemployment risk since the 1980s. Fluctuations in upside risk to unemployment are larger than fluctuations in the median outlook or downside risk to unemployment. Accounting for inflation and the state of the business cycle is important for understanding the role of financial conditions in shaping unemployment risk. The analysis suggests that fluctuations in near-term risks to unemployment decreased after 1984 because inflation stabilized, but fluctuations in medium-term risks increased owing to the large swings in credit in recent decades.
Cite this item
Michael T. Kiley, Unemployment Risk, Board of Governors of the Federal Reserve System (U.S.), Finance and Economics Discussion Series 2018-067, 28 Sep 2018.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
Keywords: Credit ; GDP at risk ; Risk management
This item with handle RePEc:fip:fedgfe:2018-67
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