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SEARCH FRICTIONS ON PRODUCT AND LABOR MARKETS: MONEY IN THE MATCHING FUNCTION

Published online by Cambridge University Press:  15 December 2009

Etienne Lehmann  and
Bruno Van Der Linden
Etienne Lehmann*
Affiliation:
CREST Université Catholique de Louvain and IZA
Bruno Van Der Linden*
Affiliation:
Université Catholique de Louvain FNRS ERMES and IZA
*
Address correspondence to: Etienne Lehmann, CREST–INSEE, Laboratoire de Macroéconomie–Timbre J360, 15 Boulevard Gabriel Péri, 92 245 Malakoff Cedex, France; e-mail: etienne.lehmann@ensae.fr. URL: http://www.crest.fr/pageperso/lehmann/lehmann.htm.
IRES, Université Catholique de Louvain, 3 place Montesquieu, B1348, Louvain la Neuve, Belgium; e-mail: bruno.vanderlinden@uclouvain.be.
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Abstract

This paper builds a macroeconomic model of equilibrium unemployment in which firms persistently face difficulties in selling their production, and this affects their decisions to create jobs. We show that the competitive search equilibrium is not efficient and that inflation is detrimental to unemployment.

Keywords

Equilibrium UnemploymentMatchingInflationDemand ConstraintsCompetitive Search Equilibrium
Type
Articles
Information
Macroeconomic Dynamics , Volume 14 , Issue 1 , February 2010 , pp. 56 - 92
Copyright
Copyright © Cambridge University Press 2009

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