I remain unconvinced by the formula. It implies, if I understand it correctly that the "cost" of excess tightness is lost income of workers searching instead of actually being employed. That seems right as far as it goes, but does it take account of the value of the search yielding a better fit, higher income?
As for the recession probability, why should we need to know if we are or are not "in" recession? [I agree that people DO so there is nothing wrong with your meeting a market demand. :)]
I agree that the unemployment gap is what we need to design stabilization policies—so to adjust monetary and fiscal policy. The fact that we are in recession or not does not feed directly into optimal policy formulas.
However, the recession rule—if it works properly—points to what is coming ahead. In recessions the unemployment rate and unemployment gap increase rapidly. The fact that the unemployment gap might be rapidly increasing is useful information for policymakers, especially for central bankers, as monetary policy takes time to become effective. It might help them anticipate drastic changes in economic conditions.
I like the data that you track!
I remain unconvinced by the formula. It implies, if I understand it correctly that the "cost" of excess tightness is lost income of workers searching instead of actually being employed. That seems right as far as it goes, but does it take account of the value of the search yielding a better fit, higher income?
As for the recession probability, why should we need to know if we are or are not "in" recession? [I agree that people DO so there is nothing wrong with your meeting a market demand. :)]
I agree that the unemployment gap is what we need to design stabilization policies—so to adjust monetary and fiscal policy. The fact that we are in recession or not does not feed directly into optimal policy formulas.
However, the recession rule—if it works properly—points to what is coming ahead. In recessions the unemployment rate and unemployment gap increase rapidly. The fact that the unemployment gap might be rapidly increasing is useful information for policymakers, especially for central bankers, as monetary policy takes time to become effective. It might help them anticipate drastic changes in economic conditions.