Labor market frictions are not the only possible factor responsible for high unemployment. Credit market imperfections, driven by microeconomic frictions and impacted upon by macroeconomic factors such as monetary policy, could also be to blame. This paper shows that labor and credit market...

Building a model with three imperfect markets – goods, labor and credit – representing a product's life-cycle, we find that goods market frictions drastically change the qualitative and quantitative dynamics of labor market variables. The calibrated model leads to a significant reduction in...

This paper shows that goods-market frictions drastically change the dynamics of the labor market, bridging the gap with the data both in terms of persistence and volatility. In a DSGE model with three imperfect markets – goods, labor and credit – we find that credit- and goods-market...