Aggregate unemployment and household unsecured debt

Bethune, Zachary; Rocheteau, Guillaume; Rupert, Peter

doi:10.1016/j.red.2014.08.002

Cited by 54 publications

(41 citation statements)

References 49 publications

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“…However, money remains the only means of payment since goods transactions remain private information. This channel is also present in other models of unsecured credit with limited enforcement, such as Sanches and Williamson (2010), Bethune, Rocheteau, and Rupert (2014), and Gu, Mattesini, and Wright (2014), among many others.…”

Section: Introductionmentioning

confidence: 90%

“…More recently, there are several models featuring divisible money and centralized credit markets using the Lagos and Wright (2005) model, including Berentsen, Camera, and Waller (2007), Telyukova and Wright (2008), Sanches and Williamson (2010), Bethune, Rocheteau, and Rupert (2014), Gu, Mattesini, and Wright (2014), and Liu, Wang, and Wright (2014). However in all these approaches, only an exogenous subset of agents can use credit while the acceptability of credit is endogenous in this paper.…”

Section: Related Literaturementioning

confidence: 99%

“…See e.g. the analysis in Gu, Mattesini, and Wright (2014) and Bethune, Rocheteau, and Rupert (2014). In addition, while we assume that a defaulter is excluded from using credit but can still use money, one can also assume that punishment for default is permanent autarky.…”

Section: Environmentmentioning

confidence: 99%

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Money and credit as means of payment: A new monetarist approach

Lotz

Zhang

2016

Journal of Economic Theory

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This paper studies the choice of payment instruments in a simple model where both money and credit can be used as means of payment. We endogenize the acceptability of credit by allowing retailers to invest in a costly record-keeping technology. Our framework captures the two-sided market interaction between consumers and retailers, leading to strategic complementarities that can generate multiple steady-state equilibria. In addition, limited commitment makes debt contracts self-enforcing and yields an endogenous upper bound on credit use. So long as record-keeping is imperfect, money and credit coexist for a range of nominal interest rates. Our model captures the dependence of debt limits on monetary policy and explains how hold-up problems in technological adoption prevent retailers from accepting credit as consumers continue to coordinate on cash usage. With limited commitment, changes in monetary policy generate multiplier effects in the credit market due to complementarities between consumer borrowing and the adoption of credit by merchants.

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Section: Introductionmentioning

confidence: 90%

Section: Related Literaturementioning

confidence: 99%

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Money and credit as means of payment: A new monetarist approach

Lotz

Zhang

2016

Journal of Economic Theory

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“…Here, x must therefore be interpreted as quality of the good, entering the utility function of the consumer. The consumer must, in addition, have the resources at the time of the meeting with the firm to pay for the price P. No credit is allowed to customers, unlike Bethune et al (2015) and Branch et al (2015) in which there is consumer credit. At each point in time there is a mass µ G (1 − U) = µ G N of firms in stage π that is both producing and selling goods 1.…”

Section: Transfers Lucas Trees and The Circular Flows Of Income In mentioning

confidence: 99%

“…The implications for fiscal policy in the face of procyclical disposable income, and the underlying question of fiscal multipliers, has been explored in Petrosky-Nadeau and Wasmer (2014). In Bethune et al (2015), drops in demand from credit constrained consumers affect the labor market through a search frictional goods market in which firms' marginal revenue declines with the level of demand faced in the goods market. Thismechanism also appears in Petrosky-Nadeau and .…”

Section: Introductionmentioning

confidence: 99%

Disentangling goods, labor, and credit market frictions in three European economies

Brzustowski¹

2015

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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.

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Real consequences of open market operations: The role of limited commitment

Carli

Gomis‐Porqueras

2021

European Economic Review

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Aggregate unemployment and household unsecured debt

Cited by 54 publications

References 49 publications

Money and credit as means of payment: A new monetarist approach

Money and credit as means of payment: A new monetarist approach

Disentangling goods, labor, and credit market frictions in three European economies

Real consequences of open market operations: The role of limited commitment

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