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 the...

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...