Short-term Unemployment
Unemployment Rate
0.02
0
-0.02
-0.04
-0.06
-0.08
-0.1
Fig. 1. Expansion in Labour Market Programs. (% Deviations from baseline.)
UOt
0246
’ US,t-1 + θUL,t-1
πL,t = θπS,t
where UOt = FUEV,t + FUEX,t + UNt
(8)
(9)
(10)
2.5 Job Creation and Destruction
The equations of motion that close the model are:
V It = Vt - Vt-1 + V OU,t + V OEX,t (11)
Ut = Ut-1 + FEUV,t + U IEX,t - FUEV,t - U OEX,t (12)
Et = Et-1 + FUEV,t + EIEX,t - FEU V,t - EOEX,t (13)
2.6 Calibration
The model is calibrated using Australian data for 1998 to produce a baseline
steady-state. The numerical values of the calibration are given in Table 4.
Figure 1 presents a step response for the model with an expansion in ALMPs
from the baseline 5% to 10%. The results are presented as deviations from the
baseline.
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