Credit market imperfections, labor markets, and leverage dynamics in emerging economies

Alan Finkelstein Shapiro and Andres Gonzalez

Journal of International Money and Finance, 2017, vol. 78, issue C, 44-63

Abstract: Emerging economies (EMEs) have different credit and labor market structures relative to advanced economies. We document that economies with larger self-employment shares tend to exhibit less countercyclical leverage dynamics. We build a model where formal credit markets, input credit relationships, and the structure of labor markets interact that (1) captures a comprehensive set of EME business cycle regularities and (2) rationalizes our new fact. The interaction between firms’ net worth, interfirm input credit, and self-employment underlying our framework is critical for explaining our fact and is supported by the data.

Keywords: Emerging economy business cycles; Financial frictions; Labor search frictions; Self-employment; Credit policies (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 F41 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:78:y:2017:i:c:p:44-63

DOI: 10.1016/j.jimonfin.2017.08.001

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