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Immigration and the macroeconomy: some new empirical evidence

Author

Listed:
  • Francesco Furlanetto

    (Norges Bank and Banco de España)

  • Ørjan Robstad

    (Norges Bank)

Abstract
We propose a new VAR identification scheme that enables us to disentangle immigration shocks from other macroeconomic shocks. Identification is achieved by imposing sign restrictions on Norwegian data over the period 1990Q1 - 2014Q2. The availability of a quarterly series for net immigration is crucial to achieving identification. Notably, immigration is an endogenous variable in the model and can respond to the state of the economy. We find that domestic labour supply shocks and immigration shocks are well identified and are the dominant drivers of immigration dynamics. An exogenous immigration shock lowers unemployment (even among native workers), has a small positive effect on prices and on public finances, no impact on house prices and household credit, and a negative effect on productivity.

Suggested Citation

  • Francesco Furlanetto & Ørjan Robstad, 2017. "Immigration and the macroeconomy: some new empirical evidence," Working Papers 1716, Banco de España.
    • Handle: RePEc:bde:wpaper:1716
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    More about this item

    Keywords

    labour supply shocks; immigration shocks; job-related immigration; identification; VAR;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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