Labor market frictions are not the only possible factor responsible for high unemployment. Credit market imperfections, driven by microeconomic frictions and impacted upon by macroeconomic factors such as monetary policy, could also be to blame. This paper shows that labor and credit market...

Financial markets and labor markets are linked: aggregate employment and stock market indices co-move positively and their volatility is comparable. While existing search-and-matching models perfectly capture the relative magnitude of these volatilities (Pissarides' law), they fail in predicting...

Bubbles are recurrent events, which contribute to both macroeconomic and employment volatility. We introduce stochastic bubbles in the standard search-and matching model of the labor market. The economy alternates between latent and bubbly states, each being associated with a distinct solution...