A Structural Analysis of Unemployment-Generating Supply Shocks with an Application to the US Pharmaceutical Industry

Sara Boni () and Francesco Ravazzolo ()
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Sara Boni: Free University of Bozen-Bolzano, Italy
Francesco Ravazzolo: Free University of Bozen-Bolzano, Italy; BI Norwegian Business School, Norway

No BEMPS94, BEMPS - Bozen Economics & Management Paper Series from Faculty of Economics and Management at the Free University of Bozen

Abstract: This paper aims to analyze unemployment-generating supply shocks. It proposes a structural vector autoregressive model estimated via a newly assembled identification scheme that relies on a minimum set of sign restrictions dictated by economic the- ory and recent market developments. We show that unemployment-generating supply shocks coexist with standard supply, demand, financial, and investment shocks, and we assess their impact on different macroeconomic variables. An application to the US pharmaceutical industry finds that the supply shock caused by Covid-19 in the sector is one of a kind. Particularly, the newly identified shock increases industrial production while decreasing the unemployment rate and producer prices in the US pharmaceutical industry.

Keywords: Supply Shock; SVAR; Pharmaceutical Industry; Macroeconomic Policy; Unemployment. (search for similar items in EconPapers)
JEL-codes: C11 C12 C22 E6 (search for similar items in EconPapers)
Pages: [49 pages]
Date: 2022-06
New Economics Papers: this item is included in nep-dem and nep-mac
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