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Journal Articles Journal of Monetary Economics Year : 2015

Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions

Nicolas Petrosky-Nadeau
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Etienne Wasmer

Abstract

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.
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hal-03392977 , version 1 (21-10-2021)

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Nicolas Petrosky-Nadeau, Etienne Wasmer. Macroeconomic Dynamics in a Model of Goods, Labor and Credit Market Frictions. Journal of Monetary Economics, 2015, 72, pp.97 - 113. ⟨10.1016/j.jmoneco.2015.01.006⟩. ⟨hal-03392977⟩
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