Murat Tasci |

Research Economist


Murat Tasci, Research Economist

Murat Tasci is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in macroeconomics and labor economics. His current work focuses on business cycles and labor markets, labor market policies and search frictions.

He has a Ph.D. and an M.S. in economics from the University of Texas at Austin. He earned his B.A. in economics at Koc University in Istanbul, Turkey.

  • Fed Publications
  • Other Publications
  • Work in Progress
Title Date Publication Author(s) Type

 

2013-07 ; Mark E Schweitzer; Economic Commentary
Abstract: The Federal Open Market Committee (FOMC) has tied its asset purchases to a "substantial improvement" in labor market conditions. While we don't speculate on what the FOMC means by substantial improvement, we do explore the level of monthly job gains that would gradually deliver the underlying trend unemployment rate within a reasonable timeframe, under several plausible scenarios. We find that the path of monthly job gains, which is highly dependent on a few key parameters, is likely to be smaller than the path associated with previous recoveries.

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December, 2012 Federal Reserve Bank of Cleveland, working paper no. 12-36R ; Pedro S Amaral; Working Papers
Abstract: We show that the inability of a standardly calibrated labor search-and-matching model to account for labor market volatility extends beyond the U.S. to a set of OECD countries. That is, the volatility puzzle is ubiquitous. We argue cross-country data is helpful in scrutinizing between potential solutions to this puzzle. To illustrate this, we show that the solution proposed in Hagedorn and Manovskii (2008) continues to deliver counterfactually low volatility in countries where labor-productivity persistence and/or steady-state job-finding rates are sufficiently low. Moreover, the model's ability to generate high enough volatility depends on vacancy-filling-rate levels that seem counterfactual outside the U.S.

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November, 2012 Federal Reserve Bank of Cleveland, working paper no. 12-24 ; Working Papers
Abstract: This paper proposes an empirical method for estimating a long-run trend for the unemployment rate that is grounded in the modern theory of unemployment. I write down an unobserved-components model and identify the cyclical and trend components of the underlying unemployment flows, which in turn imply a time-varying estimate of the unemployment trend, the natural rate. I identify a sharp decline in the outflow rate—the job finding rate—since 2000, which was partly offset by the secular decline in the inflow rate—the separation rate—since the 1980s, implying a relatively stable natural rate, currently at 6 percent. Numerical examples show that slower labor reallocation, along with the weak output growth, explains most of the persistence in unemployment since the Great Recession. Contrary to the business-cycle movements of the unemployment rate, a significant fraction of the low-frequency variation can be accounted for by changes in the trend of the inflows, especially prior to 1985. Finally, I highlight several desirable features of this natural rate concept that makes it a better measure than traditional counterparts. These include statistical precision, the significance of required revisions to past estimates with subsequent data additions, policy relevance and its tight link with the theory.

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2012-08 ; Brent Meyer; Economic Commentary
Abstract: Okun’s law is a statistical relationship between unemployment and GDP that is widely used as a rule of thumb for assessing the unemployment rate—why it might be at a certain level or where it might be headed, for example. Unfortunately, the Okun’s law relationship is not stable over time, which makes it potentially misleading as a rule of thumb.

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April, 2012 Federal Reserve Bank of Cleveland, working paper no. 12-11 ; Kenneth Beauchemin; Working Papers
Abstract: We construct a multiple shock, discrete time version of the Mortensen-Pissarides labor market search model to investigate the basic model's well-known tendency to underpredict the volatility of key labor market variables. In addition to the standard labor productivity shock, we introduce shocks to matching efficiency and job separation. We conduct two set of experiments. First, we estimate the joint probability distribution of shocks that simultaneously satisfy the observed data and the first-order conditions of the multiple-shock model, and then simulate its properties. Although the multiple-shock model generates significantly more volatility while preserving the Beveridge curve relationship, it generates counterfactual implications for the cyclicality of job separations. Using a business cycle accounting approach, we design the second set of experiments to isolate the sources of model incompleteness and show that the model requires significant procyclical and volatile matching efficiency and counterfactually procyclical job separations to render the observed data without error. We conjecture that the basic Mortensen-Pissarides model lacks mechanisms to generate sufficiently strong labor market reallocation over the business cycle, and suggest nontrivial labor force participation and job-to-job transitions as promising avenues of research. NOTE: This is a substantial revision of working paper 08-13, which is a substantial revision of working paper 07-20.

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November, 2011 Vol. 2, No. 3 ; Forefront
Abstract: Is high unemployment here to stay?

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2011-18 ; Economic Commentary
Abstract: The last three U.S. recessions have been followed by “jobless recoveries.” The lack of robust job growth once GDP starts to pick up has a lot people asking if labor markets have changed in some fundamental way. I look at employment and unemployment growth in every recession since the 1950s and find that the current levels of these indicators can be explained by the severity of the Great Recession and the slow growth of GDP in the recovery.

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2011-11 ; Mary Zenker; Economic Commentary
Abstract: Countries with very flexible institutions and labor market polices, like the United States, experienced substantial increases in unemployment over the course of the Great Recession, while countries with relatively rigid institutions and strict labor market policies, like France, fared better. However, this better short-term performance comes with a tradeoff: Evidence suggests that flexible labor markets keep unemployment lower in the long run.

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April, 2011 Federal Reserve Bank of Cleveland, working paper no. 11-11R ; Andrea Pescatori; Working Papers
Abstract: We show that search frictions embedded in an RBC model primarily manifest themselves at the extensive margin. The ability to distinguish between the intensive and extensive margins, however, affects the measurement of the marginal rate of substitution (MRS). In fact, the correct measurement of the MRS, in terms of hours per worker, implies a less variable and procyclical labor wedge than the one found in Chari et al. (2007), especially at low Frisch elasticity. The main result is very robust to alternative wage determination mechanisms, even though implications for employment fluctuations may differ.

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2011-02 ; Economic Commentary
Abstract: Unemployment has remained very high since the end of last recession, leading some economists to suggest that the underlying trend of the unemployment rate must have risen, driving unemployment permanently higher. Using a more accurate method of calculating the underlying trend, I find that the long-term rate has not risen and that most of the recent increase in the unemployment rate can be attributed to cyclical causes. But the weak nature of the recovery in real output and the slow rate of worker reallocation are likely to keep unemployment at relatively high levels for the near term.

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October, 2010 Federal Reserve Bank of Cleveland, Working Paper no. 1017R ; Working Papers
Abstract: In this paper, we present a simple, reduced-form model of comovements in real activity and worker flows (job finding and separation). We use the model to uncover the trend changes in these flows, and use those to determine the trend in the unemployment rate. We argue that this trend rate has several key features that are reminiscent of a “natural rate.” (Paper revised in September 2011.)

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2010-11 ; Saeed Zaman; Economic Commentary
Abstract: The past recession has hit the labor market especially hard, and economists are wondering whether some fundamentals of the market have changed because of that blow. Many are suggesting that the natural rate of long-term unemployment—the level of unemployment an economy can’t go below—has shifted permanently higher. We use a new measure that is based on the rates at which workers are finding and losing jobs and which provides a more accurate assessment of the natural rate. We find that the natural rate of unemployment has indeed shifted higher—but much less so than has been suggested. Surprising trends in both the job-finding and job-separation rates explain much about the current state of the unemployment rate.

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2010-1 ; Economic Commentary
Abstract: Recent recessions have been followed by exceptionally slow recoveries in the labor market, and the current recession is shaping up to follow the same pattern. We take a close look at some labor market measures and uncover a difference between these recent recessions and those that preceded them—workers are staying unemployed longer. This difference is a clue we can use to predict how the current labor market recovery might proceed in the near future.

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December 2008 Federal Reserve Bank of Cleveland, Working Paper no. 08-13 ; Kenneth Beauchemin; Working Papers
Abstract: We construct a multiple-shock version of the Mortensen-Pissarides labor market search model to investigate the basic model’s well-known tendency to underpredict the volatility of key labor market variables. Data on U.S. job-finding and job separation probabilities are used to help estimate the parameters of a three-dimensional shock process comprising labor productivity, job separation, and matching or “allocative” effciency. Although our multiple-shock model generates some more volatility, it has counterfactual implications for the cyclicality of unemployment and vacancies. Our second exercise forces the model to be the data-generating process to uncover the necessary realizations of all three shocks. We show that the Mortensen-Pissarides labor market search model requires significantly procyclical and volatile matching efficiency and job separations to simultaneously account for high procyclical variations in job-finding probabilities as well as relatively small net employment changes in the data. Hence, the model is more fundamentally flawed than its inability to amplify shocks would suggest. We also show that variation in job separations accounts for most of the employment fluctuations, suggesting that endogenous separations could be the key feature of an improved model. This leads us to conclude that the model lacks mechanisms to generate procyclical matching efficiency and labor force reallocation. As for the latter, we conjecture that nontrivial labor force participation and job-to-job transitions are promising avenues of research. [NOTE: This paper is a revised version of an earlier working paper of the same title, WP 07-20, and it has been revised again as WP 12-12.

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January, 2008 Federal Reserve Bank of Cleveland, Working Paper no. 0801 ; Guillaume Rocheteau; Working Papers
Abstract: We review the positive and normative effects of a minimum wage in various versions of a search-theoretic model of the labor market.

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December, 2007 Federal Reserve Bank of Cleveland, Working Paper no. 0725 ; Working Papers
Abstract: This paper studies amplification of productivity shocks in labor markets through on-the-job-search. There is incomplete information about the quality of the employee-firm match which provides persistence in employment relationships and the rationale for on-the-job search. Amplification arises because productivity changes not only affect firms? probability of contacting unemployed workers but also of contacting already employed workers. Since higher productivity raises the value of all matches, even low quality matches become productive enough to survive in expansions. Therefore the measure of workers in low quality matches is greater when productivity is high, implying a higher probability of switching to another match. In other words, firms are more likely to meet employed workers in expansions and those they meet are more likely to accept a firm?s job offer because they are more likely to be employed in a low quality match. This introduces strongly procyclical labor market reallocation through procyclical job-to-job transitions. Simulations with a productivity process that is consistent with average labor productivity in the U.S. show that standard deviations for unemployment, vacancies and market tightness (vacancy-unemployment ratio) match the U.S. data. The model also reconciles the presence of endogenous separation with the negative correlation of unemployment and vacancies over business cycle frequencies (i.e. it is consistent with the Beveridge curve).

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December, 2007 Federal Reserve Bank of Cleveland, Working Paper no. 0720 ; Kenneth Beauchemin; Working Papers
Abstract: This paper constructs a multiple-shock version of the Mortensen-Pissarides labor market search model to investigate the basic model’s well-known tendency to under predict the volatility of key labor market variables. Data on U.S. job finding and job separation probabilities are used to help estimate the parameters of a three-dimensional shock process comprising labor productivity, job separation, and matching or “allocative” efficiency. The authors show that the Mortensen-Pissarides labor market search model requires significantly procyclical and volatile job separations to simultaneously account for high procyclical variations in jobfinding probabilities as well as relatively small net employment changes. Hence, the model is more fundamentally flawed than its inability to amplify shocks would suggest. This leads the authors to conclude that the model lacks mechanisms to generate procyclical matching efficiency and labor force reallocation. As for the latter, the authors conjecture that nontrivial labor force participation and job-to-job transitions are promising avenues of research. NOTE: This paper has been revised and reposted, first as WP08-13, and most recently as WP12-11.

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November 2007 Federal Reserve Bank of Cleveland, Economic Commentary ; Guillaume Rocheteau; Economic Commentary
Abstract: Can two countries, or two different states, with similar technologies, resources, and policies exhibit differences in labor market performance? In contrast to a commonly held view, the answer is yes under some conditions that we review in this Commentary. If these conditions are satisfied, the unemployment rate and the production of an economy can fluctuate even in the absence of shocks. Moreover, government intervention can be useful provided that it coordinates the economy on the preferred outcome.

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May 1, 2007 Federal Reserve Bank of Cleveland, Economic Commentary ; Guillaume Rocheteau; Economic Commentary
Abstract: New models of employment show that there are some cases in which a minimum wage can have positive effects on employment and social welfare. The effects depend ultimately on the prevailing market wage and the frictions in the market. Evidence to date does not support the view that raising the minimum wage will lead to positive employment effects.

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Title Date Publication Author(s) Type

 

August 2012 Macroeconomic Dynamics, published online August 22, 2012 ; Kenneth Beauchemin; Journal Article

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On-the-Job Search and Labor Market Reallocation

 

November 2005 Unpublished manuscript, Department of Economics, University of Texas at Austin ; Unpublished manuscript

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Title Date Publication Author(s) Type

 

January 2007 Unpublished manuscript ; Kenneth Beauchemin; Unpublished manuscript
Abstract: We construct a multiple-shock version of the Mortensen-Pissarides labor market search model to investigate the basic model's well-known tendency to under predict the volatility of key labor market variables. Data on U.S. job finding and job separation probabilities are used to help estimate the parameters of a three-dimensional shock process comprising labor productivity, job separation, and matching or 'allocative' efficiency. We show that the Mortensen-Pissarides labor market search model requires significantly procyclical and volatile job separations to simultaneously account for high procyclical variations in job finding probabilities as well as relatively small net employment changes. Hence, the model is more fundamentally flawed than its inability to amplify shocks would suggest. This leads us to conclude that the model lacks mechanisms to generate procyclical matching efficiency and labor force reallocation. As for the latter, we conjecture that nontrivial labor force participation and job-to-job transitions are promising avenues of research.

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