DP 0260 - Current Unemployment Variance Decomposition and Consequences of Using Proxies

We offer a decomposition for the variance of current unemployment rate that not only measures contributions labor market flows but also approximation error embedded in other decompositions use surrogates rate. Using data United States and Brazil, results latter show significant differences flows’ non-negligible distortions errors when (instead proxy) is decomposed; U.S., no substantial changes are detected.