Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119511
Authors: 
Hristov, Atanas
Year of Publication: 
2009
Series/Report no.: 
FINESS Working Paper D.7.3
Abstract: 
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.
Subjects: 
Credit and search frictions
unemployment
monetary policy
JEL: 
J64
G24
E51
Document Type: 
Working Paper

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