The Macroeconomics of Labor and Credit Market Imperfections
American Economic Review
vol. 94,
no. 4, September 2004
(pp. 944-963)
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.Citation
Wasmer, Etienne, and Philippe Weil. 2004. "The Macroeconomics of Labor and Credit Market Imperfections." American Economic Review, 94 (4): 944-963. DOI: 10.1257/0002828042002525JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E44 Financial Markets and the Macroeconomy
- E51 Money Supply; Credit; Money Multipliers
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
- J64 Unemployment: Models, Duration, Incidence, and Job Search