Land collateral and labor market dynamics in France

Leo Kaas, Patrick Pintus and Simon Ray ()
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Simon Ray: GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, Centre de recherche de la Banque de France - Banque de France

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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 firms׳ discount factor and the sluggish response of the land price are key elements that drive the results.

Keywords: Financial shocks; Financial shocks; Labor market frictions (search for similar items in EconPapers)
Date: 2016-05
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Citations: View citations in EconPapers (14)

Published in European Economic Review, 2016, 84 (C), pp.202--218. ⟨10.1016/j.euroecorev.2014.11.002⟩

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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 (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)
Working Paper: Land Collateral and Labor Market Dynamics in France (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01446200

DOI: 10.1016/j.euroecorev.2014.11.002

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