Labor Market Imperfections, Real Wage Rigidities and Financial Shocks
Laura Bisio (),
Giovanni Di Bartolomeo () and
Alessandra Pelloni ()
DEGIT Conference Papers from DEGIT, Dynamics, Economic Growth, and International Trade
By using the recent Gertler and Kiyotaki.s (2010) setup, this paper explores the interaction between real distortions stemming from the labor market institutions and financial shocks. We find that neither labor market imperfections nor fiscal institutions determining tax wedges have an impact on the volatility of the real economy induced by a financial shock. By contrast, real wage rigidities matter as they amplify the financial shock effects. Thus, economies with larger imperfections will not systematically observe larger or smaller recessions, unless a causality between imperfections and real wage rigidities is introduced.
Keywords: Financial accelerator; credit frictions; wage-setters; business cycle; volatility (search for similar items in EconPapers)
JEL-codes: E32 E44 (search for similar items in EconPapers)
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Working Paper: Labor market imperfections, real wage rigidities and financial shocks (2011)
Working Paper: Labor market imperfections, real wage rigidities and financial shocks
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Persistent link: https://EconPapers.repec.org/RePEc:deg:conpap:c017_026
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