ISR Awards

Credit and Labour Market Foundations of the Macroeconomy

The financial crisis has presented a challenge for macroeconomic research but also an opportunity to develop new models of macroeconomics based on the foundation of a thorough understanding of credit and labour markets. This is the project?s first and primary objective: to re-examine the foundations of macroeconomics in the light of the financial crisis with particular emphasis on the inter-linkages between credit and labour markets and the aggregate economy. The achievement this goal requires the incorporation of recent work on, amongst others, dynamic adverse selection problems in financial markets; models of dynamic relational contracting and risk sharing in labour markets; endogenising the link between the wages of incumbents and new hires; models of job search and occupational mobility; the heterogeneity and aggregation of frictions.