Capital Market Frictions and the Business Cycle
We augment a RBC model with capital and labor market frictions. We follow the approach of Wasmer and Weil (2004) which model market imperfections as search processes : firms must sequentially find a match with a bank first and then with a worker in order to start production. We show that the interactions between labor and capital market frictions may generate a financial accelerator or decelerator, depending on a parameter condition. We compare our model with US National Accounts data and with the empirical findings of Dell’Ariccia and Garibaldi (2005) : we find that the financial accelerator as well as real wage rigidities help in improving the statistical propqerties of the model
|Date of creation:||01 Nov 2006|
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- 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
- Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers 98-03, C.V. Starr Center for Applied Economics, New York University.
- Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
- Robert E. Hall, 2005. "Job Loss, Job Finding, and Unemployment in the U.S. Economy Over the Past Fifty Years," NBER Working Papers 11678, National Bureau of Economic Research, Inc.
- Wouter J. den Haan & Garey Ramey & Joel Watson, 1997.
"Job Destruction and Propagation of Shocks,"
NBER Working Papers
6275, National Bureau of Economic Research, Inc.
- Wouter Denhaan & Garey Ramey & Joel Watson, 1997. "FORTRAN code for Job Destruction and Propagation of Shocks," QM&RBC Codes 61, Quantitative Macroeconomics & Real Business Cycles.
- Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
- Hansen, Gary D., 1985.
"Indivisible labor and the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 16(3), pages 309-327, November.
- Robert Shimer, 2004.
"The Consequences of Rigid Wages in Search Models,"
NBER Working Papers
10326, National Bureau of Economic Research, Inc.
- David G. Blanchflower, 2004. "Self-Employment: More may not be better," NBER Working Papers 10286, National Bureau of Economic Research, Inc.
- Narayana R. Kocherlakota, 2000. "Creating business cycles through credit constraints," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 2-10.
- Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
- Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
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