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Jobless Recoveries: The Interaction between Financial and Search Frictions

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  • Dennis Wesselbaum

    (Department of Economics, University of Otago, New Zealand)

Abstract

This paper establishes a link between labor market frictions and financial market frictions. We present empirical evidence about the relation between search and financial frictions. Then, we build a stylized DSGE model that features this channel. Simulation excercises show that the model with this channel generates a strong internal propagation mechanism, replicates stylized labor market effects of the Great Recession, and, most importantly, creates a jobless recovery.

Suggested Citation

  • Dennis Wesselbaum, 2016. "Jobless Recoveries: The Interaction between Financial and Search Frictions," Working Papers 1603, University of Otago, Department of Economics, revised Feb 2016.
    • Handle: RePEc:otg:wpaper:1603
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    File URL: http://www.otago.ac.nz/economics/otago556617.pdf
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Jobless Recoveries: The Interaction between Financial and Search Frictions
      by Christian Zimmermann in NEP-DGE blog on 2017-02-16 22:31:53

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    Cited by:

    1. Carnicelli, Lauro, 2018. "Financial shocks and endogenous labor market participation," MPRA Paper 90254, University Library of Munich, Germany.
    2. Bod’a, Martin & Považanová, Mariana, 2021. "Output-unemployment asymmetry in Okun coefficients for OECD countries," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 307-323.

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    More about this item

    Keywords

    DSGE; Jobless Recovery; Labor Market and Financial Frictions;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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