1. The Macroeconomics of Labor, Credit and Financial Market Imperfections.
- Author
-
Gabrovski, Miroslav, Kospentaris, Ioannis, and Lebeau, Lucie
- Subjects
BANKING industry ,FINANCIAL markets ,MACROECONOMICS ,BOND market ,UNEMPLOYMENT - Abstract
An increasing share of corporate loans, a critical source of firm credit, are sold off banks' balance sheets and actively traded in a secondary over-the-counter market. We develop a microfounded equilibrium search-theoretic model with labor, credit, and financial markets to explore how this secondary loan market affects the real economy, highlighting a trade-off: while the market reduces the steady-state level of unemployment by 0.6pp, it amplifies its response to a 1% productivity drop from 3.6% to 4.3%. Secondary market frictions matter significantly: eliminating them would not only reduce unemployment by 1.2pp, but also dampen its volatility down to 2.7%. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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