WSEAS Transactions on Business and Economics
Print ISSN: 1109-9526, E-ISSN: 2224-2899
Volume 13, 2016
Modelling Unemployment Rate in the Czech Republic
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Abstract: Weak aggregate output demand and high unemployment are both basic features of the economy in the Czech Republic these days. For this reason, the model formulated in this paper is based on the following transition mechanism: “High unemployment leads to low consumption demand. Production is also low as no one can afford to buy the goods, which sustains high unemployment.” The paper contributes to the existing literature by incorporating this Keynesian principle of weak aggregate demand into the basic Diamond-Mortensen-Pissarides (DMP) model in a simple and novel way. Despite its simplicity, the proposed model captures the essence of the current economic crisis. The parameters of the model are econometrically estimated. The estimated model turns out to have multiple equilibria, which is interpreted from an economic point of view.
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Pages: 21-29
WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 13, 2016, Art. #3