economy permanently operates below capacity due to both structural unemployment and underemployment. The latter is a direct … demand and supply shocks are opposite to those of the standard case and result in a co-movement of unemployment and … explain movements of unemployment and underemployment in opposite directions. Finally, we show that uctuations in the total …

In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its … steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a … persistence of unemployment. -- Credit markets ; labor markets ; unemployment ; credit constraints ; search frictions …