Arnold, Lutz G. (2002) Financial Market Imperfections, Labour Market Imperfections, and Business Cycles. The Scandinavian Journal Of Economics 104 (1), pp. 105-124.
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A Greenwald–Stiglitz (1993a) style rational expectations business cycle model is introduced in which uncorrelated productivity shocks or monetary shocks generate autocorrelated employment fluctuations due to financial constraints. The propagation mechanism is carefully modelled: because of capital market imperfections (only standard debt contracts are traded), firms' labour demand changes in response to changes in their balance-sheet position; because of labour market imperfections (efficiency wages), employment and unemployment fluctuate in response to shifts in labour demand. The virtue of the model is its simplicity. Despite the fact that unemployment is endogenous, the dynamic behaviour of the model under rational expectations can be characterised analytically.
|Institutions:||Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie > Lehrstuhl für Theoretische Volkswirtschaft (Prof. Dr. Lutz Arnold)|
|Research groups and research centres:||Immobilien- und Kapitalmärkte|
|Keywords:||Finance constraints • business fluctuations • unemployment • debt deflation|
|Subjects:||300 Social sciences > 330 Economics|
|Refereed:||Yes, this version has been refereed|
|Created at the University of Regensburg:||Unknown|
|Deposited On:||24 Jun 2010 05:34|
|Last Modified:||23 Sep 2010 07:18|