The Role of confidence measures in European unemployment dynamics

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<title>Role of confidence measures in European unemployment dynamics</title>
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<namePart>García-Rodríguez, Marta</namePart>
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<namePart>Pinilla-Torremocha, Clemente</namePart>
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<publisher>Banco de España</publisher>
<dateIssued>2026</dateIssued>
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<abstract displayLabel="Summary">This working paper analyzes the joint dynamics of confidence measures and unemployment across 22 European countries using a mixed-frequency Panel FAVAR. Confidence innovations, identified to be orthogonal on impact to productivity and unemployment, are highly correlated with shocks driving the long-run behavior of unemployment but only weakly with those driving long-run productivity. A simultaneous identification shows that confidence (non-technological news) shocks account for around half of unemployment variance at business-cycle frequencies, reduce unemployment persistently, and resemble mildly inflationary transitory demand shocks, while remaining orthogonal to monetary policy shocks. Including stock prices isolates technological news shocks, which matter for productivity but play a modest role for unemployment. A search-and-matching model with adaptive learning rationalizes the empirical findings.</abstract>
<tableOfContents displayLabel="Contents">Introduction -- Data: Sources, and Transformation -- Econometric Methodology -- Empirical Results -- Model -- Robustness Tests -- Conclusion</tableOfContents>
<note type="statement of responsibility">Marta García-Rodríguez; Clemente Pinilla-Torremocha</note>
<note>Internacional</note>
<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080586300">
<topic>Mercado de trabajo</topic>
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<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080550448">
<topic>Desempleo</topic>
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<topic>Macroeconomía</topic>
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<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080567613">
<topic>Unión Europea</topic>
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<subject xmlns:xlink="http://www.w3.org/1999/xlink" xlink:href="MAPA20080566968">
<topic>Productividad</topic>
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<url displayLabel="electronic resource" usage="primary display">https://www.bde.es/wbe/es/publicaciones/analisis-economico-investigacion/documentos-trabajo/the-role-of-confidence-measures-in-european-unemployment-dynamics.html</url>
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<title>Documentos de Trabajo</title>
<partNumber>N.º 2616</partNumber>
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