Can the Mortensen‐Pissarides Matching Model Match the Business‐Cycle Facts?

We examine whether the Mortensen‐Pissarides matching model can account for the business‐cycle facts on employment, job creation, and job destruction. A novel feature of our analysis is its emphasis on the reduced‐form implications of the matching model. Our main finding is that the model can account for the business‐cycle facts, but only if the average duration of a nonemployment spell is relatively high—about 9 months or longer.