Capital Market Frictions and the Business Cycle

Nicoletti Giulio and Olivier Pierrard

No 2006053, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: We augment a RBC model with capital and labor market frictions. We follow the approach of Wasmer and Weil (2004) which model market imperfections as search processes : firms must sequentially find a match with a bank first and then with a worker in order to start production. We show that the interactions between labor and capital market frictions may generate a financial accelerator or decelerator, depending on a parameter condition. We compare our model with US National Accounts data and with the empirical findings of Dell’Ariccia and Garibaldi (2005) : we find that the financial accelerator as well as real wage rigidities help in improving the statistical propqerties of the model

Pages: 29
Date: 2006-11-01
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvec:2006053

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