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An integrated framework to study the theoretical and quantitative properties of economies with frictions in labor, financial, and goods markets.This book offers an integrated framework to study the theoretical and quantitative properties of economies with frictions in multiple markets. Building on analyses of markets with frictions by 2010 Nobel laureates Peter A. Diamond, Dale T. Mortensen, and Christopher A. Pissarides, which provided a new theoretical approach to search markets, the book applies this new paradigm to labor, finance, and goods markets. It shows, in particular, how frictions in different markets interact with each other.
The book first covers the main developments in the analysis of the labor market in the presence of frictions, offering a systematic analysis of the dynamics of this environment and explaining the notion of macroeconomic volatility. Then, building on the generality and simplicity of the search analysis, the book adapts it to other markets, developing the tools and concepts to analyze friction in these markets. The book goes beyond the traditional general equilibrium analysis of markets, which is often frictionless. It begins with the standard analysis of a single market, and then sequentially integrates more markets into the analysis, progressing from labor to financial to goods markets. Along the way, the book provides a number of useful results and insights, including the existence of a direct link between search frictions and the degree of volatility in the economy.
About the author
Nicolas Petrosky-Nadeau, formerly on the faculty of the Tepper School of Business at Carnegie Mellon University, is Research Adviser in the Economic Research Department of the Federal Reserve Bank of San Francisco.
Etienne Wasmer, formerly Professor of Economics at Sciences Po, Paris, where he is also Cofounder and Codirector of the Interdisciplinary Research Center for the Evaluation of Public Policies, is Professor of Economics at New York University Abu Dhabi, a school of New York University in the UEA, as of January 2018.
Summary
An integrated framework to study the theoretical and quantitative properties of economies with frictions in labor, financial, and goods markets.This book offers an integrated framework to study the theoretical and quantitative properties of economies with frictions in multiple markets. Building on analyses of markets with frictions by 2010 Nobel laureates Peter A. Diamond, Dale T. Mortensen, and Christopher A. Pissarides, which provided a new theoretical approach to search markets, the book applies this new paradigm to labor, finance, and goods markets. It shows, in particular, how frictions in different markets interact with each other.
The book first covers the main developments in the analysis of the labor market in the presence of frictions, offering a systematic analysis of the dynamics of this environment and explaining the notion of macroeconomic volatility. Then, building on the generality and simplicity of the search analysis, the book adapts it to other markets, developing the tools and concepts to analyze friction in these markets. The book goes beyond the traditional general equilibrium analysis of markets, which is often frictionless. It begins with the standard analysis of a single market, and then sequentially integrates more markets into the analysis, progressing from labor to financial to goods markets. Along the way, the book provides a number of useful results and insights, including the existence of a direct link between search frictions and the degree of volatility in the economy.
