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The Macroeconomics of Labor and Credit Market Imperfections

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Listed author(s):
  • Etienne Wasmer
  • Philippe Weil

Abstract

Credit market imperfections influence the labor market and aggregate economic activity. In turn, macroeconomic factors have an impact on the credit sector. To assess these effects in a tractable general-equilibrium framework, we introduce endogenous search frictions, in the spirit of Peter Diamond (1990), in both credit and labor markets. We demonstrate that credit frictions amplify macroeconomic volatility through a financial accelerator. The magnitude of this general-equilibrium accelerator is proportional to the credit gap, defined as the deviation of actual output from its perfect credit market level. We explore various extensions, notably endogenous wages.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/0002828042002525
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 94 (2004)
Issue (Month): 4 (September)
Pages: 944-963

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Handle: RePEc:aea:aecrev:v:94:y:2004:i:4:p:944-963
Note: DOI: 10.1257/0002828042002525
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Find related papers by JEL classification:
  • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
  • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
  • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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  1. den Haan, Wouter J. & Ramey, Garey & Watson, Joel, 2003. "Liquidity flows and fragility of business enterprises," Journal of Monetary Economics, Elsevier, vol. 50(6), pages 1215-1241, September.
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  3. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
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  1. Que faire pour baisser le chômage en Gaule ?
    by Petitsuix in Ecopublix on 2007-05-11 06:04:00
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