Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103081
Authors: 
Kaas, Leo
Pintus, Patrick A.
Ray, Simon
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4978
Abstract: 
The value of land in the balance sheet of French firms correlates positively with their hiring and investment flows. To explore the relationship between these variables, we develop a macroeconomic model with firms that are subject to both credit and labor market frictions. The value of collateral is driven by the forward-looking dynamics of the land price, which reacts endogenously to fundamental and non-fundamental (sunspot) shocks. We calibrate the model to French data and find that land price shocks give rise to significant amplification and hump-shaped responses of investment, vacancies and unemployment that are in line with the data.
Subjects: 
financial shocks
labor market frictions
JEL: 
E24
E32
E44
Document Type: 
Working Paper

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