Capital Market Frictions, Business Cycle and Monetary Transmission

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Capital Market Frictions, Business Cycle and Monetary Transmission

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Olivier Pierrard

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Olivier Pierrard

Abstract

Empirical evidence shows that some firms may be capital constraint because of capital market imperfections. We therefore extend the business cycle models with frictions `a la Pissarides on the labour market by also introducing symmetric frictions on the capital market. We show that the capital market frictions (and their interactions with the labour market frictions) improve the statistical properties of the model and generate a financial accelerator.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 029.

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Date of creation: Feb 2005
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Handle: RePEc:dnb:dnbwpp:029

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Find related papers by JEL classification:
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-04-03 (All new papers)
NEP-CBA-2005-04-03 (Central Banking)
NEP-DGE-2005-04-03 (Dynamic General Equilibrium)
NEP-FMK-2005-04-03 (Financial Markets)
NEP-MAC-2005-04-03 (Macroeconomics)

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