The macroeconomics of labor and credit market imperfections

Etienne Wasmer, Philippe Weil

Research output: Contribution to journalReview article

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.

Original languageEnglish (US)
Pages (from-to)944-963
Number of pages20
JournalAmerican Economic Review
Volume94
Issue number4
DOIs
StatePublished - Sep 1 2004

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General equilibrium
Credit markets
Credit
Macroeconomics
Credit market imperfections
Labor market imperfections
Labour market
Macroeconomic factors
Macroeconomic volatility
Deviation
Search frictions
Credit frictions
Economic activity
Financial accelerator
Wages

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

The macroeconomics of labor and credit market imperfections. / Wasmer, Etienne; Weil, Philippe.

In: American Economic Review, Vol. 94, No. 4, 01.09.2004, p. 944-963.

Research output: Contribution to journalReview article

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