Credit Frictions and Labor Market Dynamics

Arbeitspapier

We outline the case for credit frictions and a demand side aspect to labor market fluctuations. To illustrate the above proposition, we present a simple framework to analyze the joint dependence between a labor search problem in the labor market and a costly state verification problem in the credit market in the presence of price rigidities. Credit market imperfections amplify volatility of labor market variables to both supply and demand shocks, but to a much higher extent to demand shocks under rigid prices. The reason is that demand disturbances provide for a strong incentive to demand-constrained firms to adjust production and thereby labor factor.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: FINESS Working Paper ; No. D.7.3

Classification and Topics

• Classification: Wirtschaft ; Unemployment: Models, Duration, Incidence, and Job Search ; Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies ; Money Supply; Credit; Money Multipliers
• Subject: Credit and search frictions ; unemployment ; monetary policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hristov, Atanas
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/119511
• Last update: 10.03.2025, 11:43 AM CET