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Credit, Vacancies and Unemployment Fluctuations

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  • Nicolas Petrosky-Nadeau

    (UQAM)

Abstract

This paper investigates the implications of agency problems on credit markets when vacancy costs require some external financing for the propagation properties of an otherwise standard labor search model. The countercyclical premium on external finance greatly increases the elasticity of vacancies to exogenous innovations such that the model can match the volatility of aggregate unemployment, vacancies and labor market tension. The model is extended to allow for endogenous job separation as there is evidence that contractions are more pronounced at financially constrained firms. This improves the ability of the model to match key labor market statistics while preserving a Bevridge curve between unemployment and vacancies, and magnifies the financial accelerator.

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Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 640.

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Date of creation: 2008
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Handle: RePEc:red:sed008:640

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Cited by:
  1. Nicolas Petrosky-Nadeau & Etienne Wasmer, . "Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 2011-E6, Carnegie Mellon University, Tepper School of Business.
  2. Petrosky-Nadeau, Nicolas, 2013. "TFP during a credit crunch," Journal of Economic Theory, Elsevier, Elsevier, vol. 148(3), pages 1150-1178.
  3. Francesco Zanetti & Haroon Mumtaz, 2013. "The Effect of Labor and Financial Frictions on Aggregate Fluctuations," Economics Series Working Papers, University of Oxford, Department of Economics 690, University of Oxford, Department of Economics.
  4. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h48226q18 is not listed on IDEAS
  5. Tommaso Monacelli & Vincenzo Quadrini & Antonella Trigari, 2011. "Financial Markets and Unemployment," NBER Working Papers 17389, National Bureau of Economic Research, Inc.
  6. Petrosky-Nadeau, Nicolas & Wasmer, Etienne, 2010. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," IZA Discussion Papers 5131, Institute for the Study of Labor (IZA).
  7. Etienne Wasmer & Nicolas Petrosky-Nadeau, 2011. "Propagation in a Model of Goods, Labor and Financial Market Frictions," 2011 Meeting Papers, Society for Economic Dynamics 119, Society for Economic Dynamics.
  8. Nicolas Dromel & Elie Kolakez & Etienne Lehmann, 2009. "Credit Constraints and the Persistence of Unemployment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL halshs-00389762, HAL.
  9. Yahong Zhang, 2011. "Financial Factors and Labour Market Fluctuations," Working Papers, Bank of Canada 11-12, Bank of Canada.
  10. Atanas Hristov, 2010. "The High Sensitivity of Employment to Agency Costs: The Relevance of Wage Rigidity," SFB 649 Discussion Papers, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany SFB649DP2010-044, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  11. Atanas Hristov, 2009. "Credit Frictions and Labor Market Dynamics," Working Paper / FINESS, DIW Berlin, German Institute for Economic Research 7.3, DIW Berlin, German Institute for Economic Research.
  12. Petra Marotzke, 2011. "Macroeconomic Stability and Wage Inequality: A Model with Credit and Labor Market Frictions," Working Paper Series of the Department of Economics, University of Konstanz, Department of Economics, University of Konstanz 2011-38, Department of Economics, University of Konstanz.
  13. Joseph Mullins & Gaston Navarro & Julio Blanco, 2013. "Equilibrium Default and Slow Recoveries," 2013 Meeting Papers, Society for Economic Dynamics 694, Society for Economic Dynamics.

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