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We develop a two-sector search-matching model of the labor market with imperfect mobility of workers, augmented to incorporate a housing market and a frictional goods market. Homeowners use home equity as collateral to finance idiosyncratic consumption opportunities. A financial innovation that...
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liquidity to the financial system. To investigate the effect of central bank liquidity facilities on term interbank lending … interbank rates. This model can account for fluctuations in the term structure of credit risk and liquidity risk. A significant … shift in model estimates after the announcement of the liquidity facilities suggests that these central bank actions did …
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