Assignment 1 (Labour Economic 8160)
Due 10pm, Tuesday, Oct. 6
Note: This
assignment requires you to use Excel and STATA. Please submit your answer to
the questions below. You also need to submit the STATA do file and log file.
Please combine all files into a single PDF file.
Total mark: 40 marks
To answer the questions in A to D, you
need to do the followings first:
1) Download the following time-series
(monthly frequency) from FRED (Federal Reserve Economic Data) from 2000M12 to
2020M7.
a.
Unemployment
Level (both level and rate)
b.
Job
Openings: Total Nonfarm (both level and rate)
c. Number of Civilians Unemployed for
Less Than 5 Weeks
d. Civilian Employment Level
2) Construct the time
series for labour market tightness, job finding rate and job separation rates
using the downloaded time-series.
Now
consider the following four periods. Period
1: prior to the Great Recession (2000M12 to 2007M12); Period 2: the period
after the Great Recession but prior to Covid-19 (2010M1 to 2020M2); Period 3:
Great Recession period (2008M1 to 2009M12); Period 4: Covid-19 period (2010M3
to 2020M7).
A)
Compute
the sample average for these periods and fill out Table 1 below. Comment on any
labour market differences you have noticed across the four periods. (10
marks)
Table
1: Sample Average (Monthly Frequency)
|
Unemployment
rate |
Vacancy rate |
Labour market
tightness |
Job finding
rate |
Job separation
rate |
Period 1 |
|
|
|
|
|
Period 2 |
|
|
|
|
|
Period 3 |
|
|
|
|
|
Period 4 |
|
|
|
|
|
Following the procedure used in class, convert all monthly data to
quarterly data. Questions B)-D) are based on the quarterly data that you have
constructed. B)-D) are about labour market fluctuations at the business cycle frequency
and focus solely on Period 1 and Period 2 (excluding Great Recession and
Covid-19 period).
B)
Using
the procedure used in class, construct the trend and cyclical components of the
following variables: unemployment (level), vacancy (level), tightness, job finding
rate and job separation rate. Plot out the trend and cyclical components for
each of them (use Figures in Slides 7 and 8 in lecture 2 as examples). Conduct
the exercise for Periods 1 and 2. (10 marks)
C)
Slide
13 in Lecture 2 presents a table containing the volatilities of de-trended
unemployment and vacancy time-series for 2000-20 and the correlation of these
two variables. Construct a similar table containing all five labour market
variables (the cyclical component of each variable): unemployment, vacancy,
tightness, job finding rate and job separation rate. Conduct this exercise for Periods
1 and 2. (10 marks)
D)
Based
on your graphs and tables in B) and C), comment on the labour market
differences at the business cycle frequency (if any) between Period 1 and
Period 2, that is, between the period prior to Great Recession and the period after
the Great Recession. (10 marks)
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