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FINANCIAL SHOCKS, JOB DESTRUCTION SHOCKS, AND LABOR MARKET FLUCTUATIONS

Published online by Cambridge University Press:  17 July 2017

Francesco Zanetti
Francesco Zanetti*
Affiliation:
University of Oxford
*
Address correspondence to: Francesco Zanetti, Department of Economics, University of Oxford, Manor Road, Oxford, OX1 3UQ, UK; e-mail: [email protected].
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Abstract

This paper investigates the effect of financial shocks using a general equilibrium model that links the firm's flows of financing with labor market variables. The results show that financial shocks have sizeable effects on debt, dividend payout, and wages. Shocks to the job destruction rate are important in explaining fluctuations in unemployment. The analysis also investigates the underlying driving forces of some key comovements in the data and finds shocks to the job destructions rate important.

Keywords

Business CycleLabor Market FrictionsFinancial ShocksJob Destruction Shocks
Type
Articles
Information
Macroeconomic Dynamics , Volume 23 , Issue 3 , April 2019 , pp. 1137 - 1165
Copyright
Copyright © Cambridge University Press 2017 

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Footnotes

This paper supersedes a previously circulated draft under the title “Financial Shocks and Labor Market Fluctuations.” I am very grateful to an Associate Editor, two anonymous referees, Yunus Aksoy, Fabio Braggion, Tatiana Damjanovic, Wouter den Haan, Federico di Pace, Jordi Gali, Peter Ireland, Joao Madeira, Christopher Martin, Vincenzo Quadrini, Michał Rubaszek, Lydia Silver, Christoph Thoenissen, Carlos Thomas, Simon Wren-Lewis, and seminar participants at the Bank of England, Bank of Spain, De Nederlandsche Bank, Higher School of Economics, National Bank of Poland, University of Exeter, University of Birkbeck, University of Manchester, University of Oxford, University of Tilburg, University of Sheffield, the Annual Congress of the European Economic Association in the University of Gothenburg, the Money, Macro and Finance Research Group Conference in Birmingham University and Queen Mary University, the Royal Economic Society Annual Conference in Cambridge University, the Growth and Business Cycle in Theory and Practice in Manchester University, the Macroeconomics Conference in Bath University and the Unicredit Conference in Pavia University for extremely useful comments and suggestions.

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