Banking crises,labor reforms,and unemployment |
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Authors: | Lorenzo E Bernal-Verdugo Davide Furceri Dominique Guillaume |
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Institution: | 1. Department of Economics, University of Chicago, USA;2. Department of Economics, Bank of Mexico, Mexico;3. International Monetary Fund, USA;4. University of Palermo, Italy |
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Abstract: | Using a sample of 97 countries spanning the period 1980–2008, we estimate that banking crises have, on average, a large negative impact on unemployment. This effect, however, largely depends on the flexibility of labor market institutions: while in countries with more flexible labor markets the impact of banking crises is sharper but short-lived, in countries with more rigid labor markets the effect is initially more subdued but highly persistent. These effects are even larger for youth unemployment in the short term, and long-term unemployment in the medium term. Conversely, large upfront, or gradual but significant, comprehensive market reforms have a positive impact on unemployment, albeit only in the medium term. |
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Keywords: | E29 J60 E32 D7 |
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