The effect of financial fragility on employment

[en] Financial fragility increases economic uncertainty and restricts credit to firms, leading to lower economic growth and employment. Despite voluminous research on the relation between financial fragility and growth, the effect of financial fragility on employment is understudied. Using a global panel for the period 1998–2017, we identify a negative effect of financial fragility on employment, even after accounting for unobserved country heterogeneity. The impact of financial fragility is stronger in the post-crisis period and in more rigid labor markets, and the magnitude of the effect is higher in developing/emerging economies than in developed countries. Nevertheless, this negative effect can be mitigated in countries with a higher level of financial market development. Our results are robust to the use of several robustness tests, including different measures of financial fragility and an instrumental variables approach.

Disciplines :

Special economic topics (health, labor, transportation...)
Finance
Quantitative methods in economics & management
Macroeconomics & monetary economics

Author, co-author :

Chletsos, Michael ^✱; University of Piraeus > Department of Economics

Sintos, Andreas ^✱; University of Ioannina > Department of Economics

^✱ These authors have contributed equally to this work.

External co-authors :

Language :

English

Title :

The effect of financial fragility on employment

Publication date :

January 2021

Journal title :

Economic Modelling

ISSN :

0264-9993

eISSN :

1873-6122

Publisher :

Elsevier, Amsterdam, Netherlands

Special issue title :

Aspects of Macroeconomic Analysis and International Finance

Peer reviewed :

Peer Reviewed verified by ORBi

Additional URL :

https://www.sciencedirect.com/science/article/pii/S0264999320312013

Available on ORBilu :

since 15 November 2022

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