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Working Papers

October 2017, No. 17-12

Global Dynamics in a Search and Matching Model of the Labor Market

Nika Lazaryan and Thomas A. Lubik

We study global and local dynamics of a simple search and matching model of the labor market. We show that the model can be locally indeterminate or have no equilibrium at all, but only for parameterizations that are empirically implausible. In contrast to the local results, we show that the model exhibits chaotic and periodic dynamics for reasonable parameter values both in backward and forward time. In contrast to earlier work, we establish these results analytically without placing numerical restrictions on the parameters.