Credit market imperfections lead to job losses and economic instability.
The article explores how problems in credit markets can impact the movement of workers between jobs. When companies struggle to pay back loans, workers may lose their jobs or the entire business may shut down. This leads to a ripple effect, amplifying economic shocks and causing long-lasting changes in output. By studying real-world data, the researchers found that job losses and new hires both play a role in how employment levels change during economic ups and downs.