This paper assesses whether labor market frictions, in the form of searching and matching, can help explain movements in the labor wedge--the gap between the marginal rate of substitution (MRS) and the marginal productivity of labor in a perfectly competitive business cycle model. Results...

This paper constructs a multiple-shock version of the Mortensen-Pissarides labor market search model to investigate the basic model’s well-known tendency to under predict the volatility of key labor market variables. Data on U.S. job finding and job separation probabilities are used to help...

An overview of some recent findings about the cyclical behavior of the aggregate labor market and its relation to the overall business cycle, discussing theory and measurement issues such as the role of household production, the impact of differences in cyclical behavior of workers with...

This paper studies amplification of productivity shocks in labor markets through on-the-job-search. There is incomplete information about the quality of the employee-firm match which provides persistence in employment relationships and the rationale for on-the-job search. Amplification arises...

We construct a multiple-shock version of the Mortensen-Pissarides labor market search model to investigate the basic model’s well-known tendency to underpredict the volatility of key labor market variables. Data on U.S. job-finding and job separation probabilities are used to help estimate the...

The relatively infrequent nature of major credit distress events makes a historical approach particularly useful. Using a combination of historical narrative and econometric techniques, we identify major periods of credit distress from 1875 to 2007, examine the extent to which credit distress...

We study the macroeconomic implications of the debt overhang distortion. In our model, the distortion arises because investment is non-contractible—when a firm borrows funds, the debt contract cannot specify or depend on the firm’s future level of investment. After the debt contract is...

An analysis of the quantitative effects of agency costs in a real business cycle model, showing that these costs can explain why output growth displays positive autocorrelation at short horizons.

Changes in net lending hide the much larger and more variable gross lending flows. We present a series of stylized facts about gross loan flows and how they vary over time, bank size, and the business cycle. We look at both the intensive (increases and decreases) and extensive (entry and exits)...

An empirical and theoretical analysis of how changes in the monetary policy function affect the covariance structure of macroeconomic data.