The Macroeconomics of Credit and Labor Markets Imperfections

Etienne Wasmer and Philippe Weil

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Abstract: Credit market imperfections influence the labor market and aggregate economic activity. In turn, macroeconomic factors have an impact on the credit sector. To assess these effects in a tractable general-equilibrium framework, we introduce endogenous search frictions, in the spirit of Peter Diamond (1990), in both credit and labor markets. We demonstrate that credit frictions amplify macroeconomic volatility through a financial accelerator. The magnitude of this general-equilibrium accelerator is proportional to the credit gap, defined as the deviation of actual output from its perfect credit market level. We explore various extensions, notably endogenous wages.

Date: 2004-09
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01020132
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Published in American Economic Review, 2004, 94 (4), pp.944-963. ⟨10.1257/0002828042002525⟩

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Working Paper: The Macroeconomics of Credit and Labor Markets Imperfections (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-01020132

DOI: 10.1257/0002828042002525

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