Evidence and Theory on the Cyclical Asymmetry in Unemployment Rate Fluctuations

Abstract

A number of recent empirical studies have identified the presence of a cyclical asymmetry in unemployment rate fluctuations. In particular, during a recession the unemployment rate increases sharply, while during an expansion the unemployment rate declines only gradually. The purpose of this paper is to demonstrate that this cyclical asymmetry can be explained in an empirically plausible manner by the optimal search activities of individuals in the economy.