Conference Paper

A Structural Analysis of Unemployment-Generating Supply Shocks with an Application to the US Pharmaceutical Industry

March 2022

Conference: SNDE 2022 - 29th Annual SNDE Symposium
At: Orlando, Florida

Authors:

Free University of Bozen-Bolzano

Francesco Ravazzolo

Free University of Bozen-Bolzano

This paper aims to analyze unemployment-generating supply shocks. It proposes a structural vector autoregressive model estimated via a newly assembled identification scheme that relies on a minimum set of sign restrictions dictated by economic theory and recent market developments. We show that unemployment-generating supply shocks coexist with standard supply, demand, financial, and investment shocks, and we assess their impact on different macroeconomic variables. An application to US pharmaceutical industry finds that the supply shock caused by Covid-19 in the sector is, in fact, one of a kind. Particularly, the new identified shock increases industrial production while decreasing producer prices and unemployment rate in the US pharmaceutical industry.

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