Stock Market Bubbles and Unemployment
Pengfei Wang (),
Lifang Xu and
Jianjun Miao ()
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Lifang Xu: The Hong Kong University of Science and Technology
No 720, 2013 Meeting Papers from Society for Economic Dynamics
This paper introduces endogenous credit constraints in a search model of unemployment. These constraints generate multiple equilibria supported by self-fulfilling beliefs. A stock market bubble exists through a positive feedback loop mechanism. The collapse of the bubble tightens the credit constraints, causing firms to reduce investment and hirings. Unemployed workers are hard to find jobs generating high and persistent unemployment.
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Journal Article: Stock market bubbles and unemployment (2016)
Working Paper: Stock Market Bubbles and Unemployment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:720
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