TY  - JOUR
AU  - Monacelli,Tommaso
AU  - Quadrini,Vincenzo
AU  - Trigari,Antonella
TI  - Financial Markets and Unemployment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17389
PY  - 2011
Y2  - September 2011
UR  - http://www.nber.org/papers/w17389
L1  - http://www.nber.org/papers/w17389.pdf
N1  - Author contact info:
Tommaso Monacelli
IGIER Universita' Bocconi and CEPR
Via Roentgen 1
20136 Milano
Italy
E-Mail: tommaso.monacelli@unibocconi.it

Vincenzo Quadrini
Department of Finance and Business Economics
Marshall School of Business
University of Southern California
701 Exposition Boulevard
Los Angeles, CA 90089
Tel: 213/740-6521
Fax: 213/740-6650
E-Mail: quadrini@usc.edu

Antonella Trigari
IGIER, Università Bocconi
Via Roentgen 1
20136 Milano
Italy
Tel: +39 02 58363040
Fax: +39 02 58363302
E-Mail: antonella.trigari@unibocconi.it
AB  - We study the importance of financial markets for (un)employment fluctuations in a model with searching and matching frictions where firms issue debt under limited enforcement. Higher debt allows employers to bargain lower wages which in turn increases the incentive to create jobs. The transmission mechanism of 'credit shocks' is fundamentally different from the typical credit channel and the model can explain why firms cut hiring after a credit contraction even if they have not shortage of funds for hiring workers. The theoretical predictions are consistent with the estimation of a structural VAR whose identifying restrictions are derived from the theoretical model.
ER  -