Gross and Net Loan Flows under Search and Matching Frictions in Labour and Credit Markets
Posted: 10 Aug 2009
Date Written: August 7, 2009
The interplay of imperfections in several markets is the new frontier of New Keynesian DSGE model research. Following a suggestion put forward by Wasmer and Weil (2004) in a partial equilibrium environment, we introduce search and matching frictions in both the labour and the financial markets into a cash in advance New Keynesian DSGE theoretical model. We compare the offspring of our model with some of the empirical findings documented by the recent literature on gross credit flows dynamics over the business cycle. We show that our results are in line with several of such findings.
Keywords: Credit and search frictions, business cycle
JEL Classification: E24, E24, E44
Suggested Citation: Suggested Citation