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The Macroeconomics of Credit and Labor Markets Imperfections

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.
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Etienne Wasmer, Philippe Weil. The Macroeconomics of Credit and Labor Markets Imperfections. American Economic Review, American Economic Association, 2004, 94 (4), pp.944-963. ⟨10.1257/0002828042002525⟩. ⟨hal-01020132⟩

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