The unemployment volatility puzzle in Iran

The purpose of this study is to investigate the unemployment volatility puzzle (Shimer puzzle) for the Iranian economy. For this purpose first, the behavior of the main variables of the labor market such as unemployment, vacancies, productivity, and the ratio of vacancies to unemployment (labor market tightness) using quarterly data from 2001-2018 investigated and then the ability of search and a matching model (DMP) to show fluctuations business cycles in the labor market were assessed through calibration on the Dynare. The results show that the search and matching model is successful in predicting the cyclical pattern of labor market variables, although it cannot explain the fluctuations observed in unemployment and vacancies in response to labor productivity shocks, and the calibrated model is able to explain less than 1/4 the observed fluctuations in the ratio of vacancies to unemployment. This study is the first quantitative work in this field for the Iranian economy that can be the basis for future research, including by recognizing the characteristics that are specific to the Iranian labor market can provide a solution appropriate to these characteristics for the Shimer puzzle. As long as the search and matching model is used to design and evaluate labor market policies, it is necessary to take into account the characteristics of business cycles of labor market variables, so it is suggested that more studies be conducted to identify the characteristics of Iranchr('39')s labor market that bring the search and matching model closer to the data.