Japan~s Labor Market Cyclicality And The Volatility Puzzle
The search and matching model has recently come under criticism for its inability to account for some of the cyclical properties of the U.S. labor market. Shimer (2005) has shown that the basic version of the model is incapable of reproducing the volatility of the market tightness for reasonable movements in productivity. This paper considers whether the so-called "Shimer Puzzle" also holds for the Japanese economy. The authors present empirical evidence on the cyclical properties of the labor market variables in Japan and compare these to their U.S. counterparts.