We build a flexible model with search frictions in three markets: credit, labor, and goods markets. We then apply this model (called CLG) to three different economies: a flexible, finance-driven economy (the UK), an economy with wage moderation (Germany), and an economy with structural rigidities (Spain). In the three countries, goods and credit market frictions play a dominant role in entry costs and account for 75% to 85% of total entry costs. In the goods market, adverse supply shocks are amplified through their propagation to the demand side, as they also imply income losses for consumers. This adds up to, at most, an additional 15% to 25% to the impact of the shocks. Finally, the speed of matching in the goods market and the credit market accounts for a small fraction of unemployment: Most variation in unemployment comes from the speed of matching in the labor market. * This paper previously circulated under the title "A steady-state model of a non-Walrasian economy with three imperfect markets." We thank the participants of the conference in honor of Chris Pissarides, June-July 2015, the participants of seminars in Cologne (Macro group), U. Geneva, ILO seminar, and in particular Martin Scheffel, Matthieu Charpe, Frédéric Robert-Nicoud. These views are those of the authors and do not necessarily reflect the views of the Federal Reserve System. All remaining errors are our own. Etienne Wasmer also acknowledges support from ANR-11-LABX-0091 (LIEPP) and ANR-11-IDEX-0005-02.

This paper reconsiders the problem of a durable-good monopolist who cannot make intertemporal commitments. The buyer’s valuation is binary and his private information. The seller has access to dynamic contracts and, in each period, decides whether to deploy the previous period’s contract or to replace it with a new one. The main result of the paper is that the Coase conjecture fails: the monopo-list’s payoff is bounded away from the low valuation irrespective of the discount factor. (JEL D42, D82, D86, L12)

We build a flexible model with search frictions in three markets: credit, labor, and goods markets. We then apply this model (called CLG) to three different economies: a flexible, finance-driven economy (the UK), an economy with wage moderation (Germany), and an economy with structural rigidities (Spain). In the three countries, goods and credit market frictions play a dominant role in entry costs and account for 75% to 85% of total entry costs. In the goods market, adverse supply shocks are amplified through their propagation to the demand side, as they also imply income losses for consumers. This adds up to, at most, an additional 15% to 25% to the impact of the shocks. Finally, the speed of matching in the goods market and the credit market accounts for a small fraction of unemployment: Most of the variation in unemployment comes from the speed of matching in the labor market. * This paper previously circulated under the title "A steady-state model of a non-Walrasian economy with three imperfect markets." We thank the participants of the conference in honor of Chris Pissarides, June-July 2015, the participants of seminars in Cologne (Macro group), U. Geneva, ILO seminar, and in particular Martin Scheffel, Matthieu Charpe, Frédéric Robert-Nicoud. These views are those of the authors and do not necessarily reflect the views of the Federal Reserve System. All remaining errors are our own. Etienne Wasmer also acknowledges support from ANR-11-LABX-0091 (LIEPP) and ANR-11-IDEX-0005-02.