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Global Financial Risk, Domestic Financial Access, and Unemployment Dynamics

Brendan Epstein (), Alan Finkelstein Shapiro () and Andres Gonzalez Gomez

MPRA Paper from University Library of Munich, Germany

Abstract: We empirically show that after an increase in global financial risk, the response of unemployment is markedly more subdued in emerging economies (EMEs) relative to small open advanced economies (SOAEs), while the differential response of GDP and investment across the two country groups is noticeably smaller, if at all, in EMEs. A model with banking frictions, frictional unemployment, and household and firm heterogeneity in financial inclusion can help rationalize these facts. Limited financial inclusion among households is central to explaining the differ- ential response of unemployment in EMEs amid global financial risk shocks.

Keywords: Emerging economies; business cycles; unemployment; labor search frictions; financial frictions; financial inclusion. (search for similar items in EconPapers)
JEL-codes: E24 E32 E44 F41 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-fle, nep-mac and nep-opm
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