The Macroeconomics of Credit and Labor Markets Imperfections

Etienne Wasmer (1) , Philippe Weil (2)

1 ECON - Département d'économie (Sciences Po)
2 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

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.

Domaines: Economies et finances

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