Increasing Domestic Financial Participation: Implications for Business Cycles and Labor Markets
Brendan Epstein () and
Alan Finkelstein Shapiro ()
Review of Economic Dynamics, 2021, vol. 39, 128-145
Recent policies in emerging economies (EMEs) have sought to increase the shares of households and firms that participate in the domestic banking system amid the backdrop that, compared to advanced economies (AEs), EMEs have drastically lower shares of both firm and household financial participation. We build a model with extensive margins of firm and household financial participation and equilibrium unemployment to study the impact on EME labor-market and business cycle dynamics of increasing the shares of firm and household financial participation in EMEs to AE levels. We find that a joint increase in household and firm domestic financial participation considerably narrow the differences in some, but not all, business cycle moments between EMEs and AEs. Critically, the impact of increasing only firm or only household participation can differ substantially from the impact of a joint increase. We stress the relevance of the extensive margin of domestic financial participation for labor-market and business cycle dynamics and the fact that promoting a joint increase in the shares of household and firm financial participation in EMEs can lead to smoother cyclical fluctuations, particularly in labor markets. (Copyright: Elsevier)
Keywords: Emerging economies; Endogenous firm entry; Business cycles; Working capital; Unemployment; Domestic financial participation (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 F41 G21 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.
Software Item: Code and data files for "Increasing Domestic Financial Participation: Implications for Business Cycles and Labor Markets" (2020)
Working Paper: Online Appendix to "Increasing Domestic Financial Participation: Implications for Business Cycles and Labor Markets" (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:issued:19-234
Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/
Access Statistics for this article
Review of Economic Dynamics is currently edited by Loukas Karabarbounis
More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().