Financial Markets and Unemployment / Tommaso Monacelli, Vincenzo Quadrini, Antonella Trigari.

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Monacelli, Tommaso

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w17389.Publication details: Cambridge, Mass. National Bureau of Economic Research 2011.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We study the importance of financial markets for (un)employment fluctuations in a model with searching and matching frictions where firms issue debt under limited enforcement. Higher debt allows employers to bargain lower wages which in turn increases the incentive to create jobs. The transmission mechanism of 'credit shocks' is fundamentally different from the typical credit channel and the model can explain why firms cut hiring after a credit contraction even if they have not shortage of funds for hiring workers. The theoretical predictions are consistent with the estimation of a structural VAR whose identifying restrictions are derived from the theoretical model.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w17389 (Browse shelf(Opens below))	Not For Loan

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September 2011.

We study the importance of financial markets for (un)employment fluctuations in a model with searching and matching frictions where firms issue debt under limited enforcement. Higher debt allows employers to bargain lower wages which in turn increases the incentive to create jobs. The transmission mechanism of 'credit shocks' is fundamentally different from the typical credit channel and the model can explain why firms cut hiring after a credit contraction even if they have not shortage of funds for hiring workers. The theoretical predictions are consistent with the estimation of a structural VAR whose identifying restrictions are derived from the theoretical model.