Land Collateral and Labor Market Dynamics in France

Leo Kaas, Patrick Pintus and Simon Ray ()
Additional contact information
Simon Ray: Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS, and Banque de France., http://www.greqam.fr/en/users/ray

No 1443, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: The value of land in the balance sheet of French firms correlates positively with their hiring and investment flows. To explore the relationship between these variables, we develop a macroeconomic model with firms that are subject to both credit and labor market frictions. The value of collateral is driven by the forward-looking dynamics of the land price, which reacts endogenously to fundamental and non-fundamental (sunspot) shocks. We calibrate the model to French data and find that land price shocks give rise to significant amplification and hump-shaped responses of investment, vacancies and unemployment that are in line with the data. We show that both the endogenous movements in the firm’s discount factor and the sluggish response of the land price are key elements that drive the results.

Keywords: financial shocks; labor market frictions. (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-09, Revised 2014-10
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Land collateral and labor market dynamics in France (2016)
Working Paper: Land collateral and labor market dynamics in France (2016)
Working Paper: Land Collateral and Labor Market Dynamics in France (2014)
Working Paper: Land Collateral and Labor Market Dynamics in France (2014)
Working Paper: Land Collateral and Labor Market Dynamics in France (2014)
Working Paper: Land Collateral and Labor Market Dynamics in France (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1443

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