In this paper global macroeconomic dynamics are studied when search frictions are present in both labor and capital markets. On the basis of the Merz (1995) macroeconomic model with labor market frictions and capital accumulation, our paper offers an extension to frictions in capital markets,...

Two difficulties arise in the estimation of AB models: (i) the criterion function has no simple analytical expression, (ii) the aggregate properties of the model cannot be analytically understood. In this paper we show how to circumvent these difficulties and under which conditions ergodic...