Macroeconomic dynamics in a model of goods, labor, and credit market frictions

Nicolas Petrosky-Nadeau and Etienne Wasmer

Journal of Monetary Economics, 2015, vol. 72, issue C, 97-113

Abstract: Goods market frictions drastically change the dynamics of the labor market, both in terms of persistence and volatility. In a model with three imperfect markets – goods, labor, and credit – we find that credit and goods market imperfections are substitutable in raising volatility. Goods market frictions are unique in generating persistence. Two key mechanisms in the goods market generate large hump-shaped responses to productivity shocks: countercyclical goods market tightness and prices alter future profit flows and raise persistence; procyclical search effort of consumers and firms raises amplification. Goods market frictions are thus key in understanding labor market dynamics.

Keywords: Goods market search; Labor market dynamics; Propagation; Credit market frictions (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (78)

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Related works:
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2015)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2015)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2014)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2014)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2014)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2011)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2011)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2011)
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:72:y:2015:i:c:p:97-113

DOI: 10.1016/j.jmoneco.2015.01.006

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