Propagation in a Model of Goods, Labor and Financial Market Frictions
AbstractInvestigating mechanisms of propagation has been central to the business cycle research agenda since its inception. Recent search models of the labor market fail in generating both the size and the persistence of their of central variables to productivity shocks, as does the RBC model in the case of output. Building a model with three imperfect markets - goods, labor and credit -, we find that goods market frictions drastically change the qualitative and quantitative dynamics of labor market variables, leading to significant improvements in bridging the gap with the data both in terms of persistence and volatility. Two factors affecting the expected path of the value to hiring a worker generate persistence: first, the expected dynamics of congestion on goods market, which depends on consumers' search for goods and the entry of new products; and second, the expected dynamics of prices, which alter future profit flows. In the absence of these frictions, there is no persistence in the growth rates, and little amplification, of labor market variables.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 119.
Date of creation: 2011
Date of revision:
Contact details of provider:
Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Benassy, Jean-Pascal, 1993. "Nonclearing Markets: Microeconomic Concepts and Macroeconomic Applications," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 732-61, June.
- Nicolas Petrosky-Nadeau & Etienne Wasmer, .
"The cyclical volatility of labor markets under frictional financial markets,"
GSIA Working Papers
2010-E1, Carnegie Mellon University, Tepper School of Business.
- Nicolas Petrosky-Nadeau & Etienne Wasmer, 2013. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(1), pages 193-221, January.
- Nicolas Petrovsky-Nadeau & Etienne Wasmer, 2010. "The Cyclical Volatility of Labor Markets under Frictional Financial Markets," Sciences Po publications info:hdl:2441/5l6uh8ogmqi, Sciences Po.
- 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).
- Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
- Dale T. Mortensen & Eva Nagypal, 2005.
"More on Unemployment and Vacancy Fluctuations,"
NBER Working Papers
11692, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Mark Gertler, 1995.
"Inside the Black Box: The Credit Channel of Monetary Policy Transmission,"
NBER Working Papers
5146, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
- Steve J. Davis & John Haltiwanger, 1991.
"Gross job creation, gross job destruction and employment reallocation,"
Working Paper Series, Macroeconomic Issues
91-5, Federal Reserve Bank of Chicago.
- Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
- Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
- Gary Hansen, 2010.
"Indivisible Labor and the Business Cycle,"
Levine's Working Paper Archive
233, David K. Levine.
- Nicolas Petrosky-Nadeau, 2014.
"Credit, Vacancies and Unemployment Fluctuations,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 191-205, April.
- Nicolas Petrosky-Nadeau, 2009. "Credit, Vacancies and Unemployment Fluctuations," GSIA Working Papers 2009-E27, Carnegie Mellon University, Tepper School of Business.
- Nicolas Petrosky-Nadeau, 2008. "Credit, Vacancies and Unemployment Fluctuations," 2008 Meeting Papers 640, Society for Economic Dynamics.
- John Moore & Nobuhiro Kiyotaki, .
1995-5, Edinburgh School of Economics, University of Edinburgh.
- Richard Rogerson, 2010.
"Indivisible Labor, Lotteries and Equilibrium,"
Levine's Working Paper Archive
250, David K. Levine.
- Dell''Ariccia, Giovanni & Garibaldi, Pietro, 2000.
"Gross Credit Flows,"
CEPR Discussion Papers
2569, C.E.P.R. Discussion Papers.
- Etienne Wasmer, 2011.
"A steady-state model of a non-walrasian economy with three imperfect markets,"
Sciences Po publications
info:hdl:2441/5l6uh8ogmqi, Sciences Po.
- Wasmer, Etienne, 2011. "A Steady-State Model of a Non-Walrasian Economy with Three Imperfect Markets," IZA Discussion Papers 5758, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.