Uncertainty and the Employment Dynamics of Small and Large Businesses

Vivek Ghosal () and Yang Ye

No 2015/004, IMF Working Papers from International Monetary Fund

Abstract: We examine the impact of uncertainty on employment dynamics. Alternative measures of uncertainty are constructed based on the survey of professional forecasters, and regressionbased forecasting models for GDP growth, inflation, S&P500 stock price index, and fuel prices. Our results indicate that greater uncertainty has a negative impact on growth of employment, and the effects are primarily felt by the relatively smaller businesses; the impact on large businesses are generally non-existent or weaker. Our results suggest that to truly understand the effects of uncertainty on employment dynamics, we need to focus on the relatively smaller and entrepreneurial businesses. We discuss implications for the framing of economic policy.

Keywords: WP; price index; real GDP; dependent variable; uncertainty; employment; small businesses; entrepreneurship; real-options; financing-constraints; uncertainty measure; representative firm; business group; venture capital; size class; costs firms face; stock price index; BLS fuel price indices; fuel price uncertainty; financing-constraints channel; employment decision; inflation rate; Small and medium enterprises; Fuel prices; Inflation; Global (search for similar items in EconPapers)
Pages: 49
Date: 2015-01-14
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Citations: View citations in EconPapers (22)

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Related works:
Journal Article: Uncertainty and the employment dynamics of small and large businesses (2015)
Working Paper: Uncertainty and the Employment Dynamics of Small and Large Businesses (2014)
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