But central bankers may themselves have done a lot to make output shocks smaller by getting inflation under control and thus by anchoring inflationary expectations at a low level.
Eligibility requirements tend to reduce the responsiveness of take-up to output shocks.
This paper analyzes fiscal and monetary policy interaction in a simple policy game with debt and output shocks.
Special attention is given to the dynamic aspects of the relationship between output shocks and labour market outcomes.
The indirect effects of STW on the responsiveness of labour market outcomes to output shocks are potentially important.
STW schemes increase the contemporaneous elasticity of average hours worked for permanent workers with respect to output shocks.
There is some evidence that requiring firms to share in the cost of STW reduces the responsiveness of take-up to output shocks.
In principle, STW schemes could affect labour demand directly and indirectly by affecting the way output shocks are transmitted to labour demand.
The relatively small impact of STW on employment reflects the fact that employment tends to respond to output shocks with a time lag.
STW has a tendency to mitigate the unemployment impact of output shocks: the increase in unemployment as a result of a reduction in output tends to be smaller in the context of STW.
