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Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions

Nicolas Petrosky-Nadeau and Etienne Wasmer ()
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Nicolas Petrosky-Nadeau: Tepper School of Business

Sciences Po publications from Sciences Po

Abstract: Goods market frictions drastically change the dynamics of the labor market, both in terms of persistence and volatility. In a model with three imperfect markets – goods, labor, and credit – we find that credit and goods market imperfections are substitutable in raising volatility. Goods market frictions are unique in generating persistence. Two key mechanisms in the goods market generate large hump-shaped responses to productivity shocks: countercyclical goods market tightness and prices alter future profit flows and raise persistence; procyclical search effort of consumers and firms raises amplification. Goods market frictions are thus key in understanding labor market dynamics.

Keywords: Goods market search; Labor market dynamics; Propagation; Credit market frictions (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2015-05
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Published in Journal of Monetary Economics, 2015, vol. 72, pp.97-113

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Related works:
Journal Article: Macroeconomic dynamics in a model of goods, labor, and credit market frictions (2015) Downloads
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2014) Downloads
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2014) Downloads
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2014) Downloads
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2011) Downloads
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2011) Downloads
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions (2011) Downloads
Working Paper: Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions Downloads
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