Cite this item:
Wesselbaum, D. (2016). Jobless Recoveries: The Interaction between Financial and Search Frictions (Economics Discussion Papers Series No. 1603). University of otago. Retrieved from http://hdl.handle.net/10523/6215
This paper establishes a link between labor market frictions and financial market frictions. We present empirical evidence about the relation between search and financial frictions. Then, we build a stylized DSGE model that features this channel. Simulation excercises show that the model with this channel generates a strong internal propagation mechanism, replicates stylized labor market effects of the Great Recession, and, most importantly, creates a jobless recovery.