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Hangovers

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  • Yong Kim

Abstract

This paper analyzes a process by which a market boom brought on by a temporary increase in the flow of buyers, can subsequently lead to a collapse of liquidity (speed of sale), prices and production to levels lower than before the onset of the boom. I consider a general model of markets subject to search frictions in the matching of buyers and sellers, where the entry of buyers and sellers (through production) are subject to adjustment costs . The resulting co-movement between unemployment, inventories and sales with the production cycle matches the stylized facts.

Suggested Citation

  • Yong Kim, 2012. "Hangovers," International Economic Journal, Taylor & Francis Journals, vol. 26(2), pages 203-218, July.
    • Handle: RePEc:taf:intecj:v:26:y:2012:i:2:p:203-218
    DOI: 10.1080/10168737.2012.693325
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    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. Ricardo Lagos & Guillaume Rocheteau, 2009. "Liquidity in Asset Markets With Search Frictions," Econometrica, Econometric Society, vol. 77(2), pages 403-426, March.
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