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Labor Market and Financial Shocks: A Time‐Varying Analysis

Francesco Corsello and Valerio Nispi Landi ()

Journal of Money, Credit and Banking, 2020, vol. 52, issue 4, 777-801

Abstract: We estimate a time‐varying VAR model to analyze the effects of a financial shock on the U.S. labor market. We find that a tightening of financial conditions is highly detrimental to the labor market. We show that while negative financial shocks have been responsible for increases in unemployment, our model does not find significant contributions of financial shocks during periods of expansion. The source of this asymmetry is the time‐varying standard deviation of the identified shock, which is higher in times of financial distress; on the other hand, we find that the transmission mechanism does not significantly change over time.

Date: 2020
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https://doi.org/10.1111/jmcb.12638

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Working Paper: Labor market and financial shocks: a time varying analysis (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:52:y:2020:i:4:p:777-801

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Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

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