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Hangovers

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  • Yong Kim

Abstract

This paper analyzes a process by which a market boom brought on by a temporary increase in the flow of buyers, can subsequently lead to a collapse of liquidity (speed of sale), prices and production to levels lower than before the onset of the boom. I consider a general model of markets subject to search frictions in the matching of buyers and sellers, where the entry of buyers and sellers (through production) are subject to adjustment costs . The resulting co-movement between unemployment, inventories and sales with the production cycle matches the stylized facts.

Suggested Citation

  • Yong Kim, 2012. "Hangovers," International Economic Journal, Taylor & Francis Journals, vol. 26(2), pages 203-218, July.
    • Handle: RePEc:taf:intecj:v:26:y:2012:i:2:p:203-218
    DOI: 10.1080/10168737.2012.693325
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    References listed on IDEAS

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    1. Ricardo Lagos & Guillaume Rocheteau, 2009. "Liquidity in Asset Markets With Search Frictions," Econometrica, Econometric Society, vol. 77(2), pages 403-426, March.
    2. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, April.
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