Essays on Macroeconomics

The financial frictions stemming from the 2008-2009 financial crisis had repercussions through the US economy, particularly affecting the labour market. First I find that after an increase in the external finance premium, as a measure of financial frictions, there is a decrease in the job-finding rate and the job-separation rate. Then I explore how a financial friction in a monetary policy model with job search affects inflation and the labour market. The key mechanism of the model is that credit market conditions impact directly on job creation, where the financial friction takes place when the firm funds the cost of posting a vacancy. The novelty with this is that in a model with job search and matching in the labour market, as the impact of monetary policy and the friction is not directly on wages, then there is an effect on inflation, something that does not happen if monetary policy affects the wages directly, because wages have long term negotiation. With this credit friction financing constraints increase when there is a recession because the value of the firms' net worth diminishes, and the cost of liquidation of assets increases, therefore there is an increase in the opportunity cost of job creation. I find that when financing constraints increase there is a larger effect on inflation after a contractionary monetary policy shock, and the model can replicate labor market dynamics, including a negative correlation between vacancies and unemployment. Finally, we examine the impact of job destruction on labour market dynamics in the short term using a theoretical model of job search and matching. This framework integrates capital, endogenous job destruction, and a constant elasticity of substitution production function, crucial for understanding the interplay between capital and labor. Our premise considers the declining complementarity between capital and labour due to skill-biased technical change. Our findings reveal a significant decrease in the steady state of capital following reduced complementarity among production factors. This suggests that firms, facing challenges in finding suitable workers, subsequently reduce their investments. Moreover, we observed similar trends when the exogenous rate of job destruction increased and when the likelihood of a productivity shock heightened. This mismatch between firms and available workers not only hampers job prospects for the unemployed but also triggers a detrimental cycle where both investment and production decline as firms deplete their capital reserves.