TY - JOUR
T1 - Macroeconomic dynamics in a model of goods, labor, and credit market frictions
AU - Petrosky-Nadeau, Nicolas
AU - Wasmer, Etienne
N1 - Funding Information:
We thank the editor, an anonymous referee, Evi Pappa, Peter Rupert, Espen Moen, Johannes Schmieder, Thijs Van Rens, Guido Menzio, Randall Wright, Philipp Kircher, Shigeru Fujita and the seminar participants at the LAEF Micro–Macro Labor Models, CEPR/ECB Labor Markets conferences, University of Amsterdam, Norwegian School of Management, CREI, UC-Irvine, University of Southern California, Penn Search and Matching Workshop, Federal Reserve Banks of Richmond and San Francisco, and the Kiel Institute New Developments, and Thema-Cergy Macro-Labor conferences for helpful comments. We also thank Garey Ramey and Shigeru Fujita for kindly sharing their data with us. This work was in part undertaken during the two authors׳ stay at UCSB-LAEF, the hospitality of which is gratefully acknowledged. We finally thank the editor Urban Jermann and an anonymous referee. Financial support from ANR-11-LABX-0091 (LIEPP), ANR-11-IDEX-0005-02 and ANR 2010 BLANC 1819 01 (EvalPolPub) is also acknowledged. The views expressed here are those of the authors alone and not of the Federal Reserve System.
Publisher Copyright:
© 2015 Elsevier B.V.
PY - 2015/5/1
Y1 - 2015/5/1
N2 - Goods market frictions drastically change the dynamics of the labor market, both in terms of persistence and volatility. In a model with three imperfect markets - goods, labor, and credit - we find that credit and goods market imperfections are substitutable in raising volatility. Goods market frictions are unique in generating persistence. Two key mechanisms in the goods market generate large hump-shaped responses to productivity shocks: countercyclical goods market tightness and prices alter future profit flows and raise persistence; procyclical search effort of consumers and firms raises amplification. Goods market frictions are thus key in understanding labor market dynamics.
AB - Goods market frictions drastically change the dynamics of the labor market, both in terms of persistence and volatility. In a model with three imperfect markets - goods, labor, and credit - we find that credit and goods market imperfections are substitutable in raising volatility. Goods market frictions are unique in generating persistence. Two key mechanisms in the goods market generate large hump-shaped responses to productivity shocks: countercyclical goods market tightness and prices alter future profit flows and raise persistence; procyclical search effort of consumers and firms raises amplification. Goods market frictions are thus key in understanding labor market dynamics.
KW - Credit market frictions
KW - Goods market search
KW - Labor market dynamics
KW - Propagation
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U2 - 10.1016/j.jmoneco.2015.01.006
DO - 10.1016/j.jmoneco.2015.01.006
M3 - Article
AN - SCOPUS:84928759993
SN - 0304-3932
VL - 72
SP - 97
EP - 113
JO - Carnegie-Rochester Confer. Series on Public Policy
JF - Carnegie-Rochester Confer. Series on Public Policy
ER -