Title Macroprudential policy and labor market dynamics in emerging economies / prepared by Alan Finkelstein Shapiro and Andres Gonzalez

Published [Washington, D.C.] : International Monetary Fund, ©2015

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Description 1 online resource (48 pages) : color illustrations Series IMF working paper, 1018-5941 ; WP/15/78 IMF working paper ; WP/15/78. Contents Cover Page; Title Page; Copyright Page; Contents; Appendices; I. Introduction; II. Evidence on Modeling Assumptions; III. The Model; A. Households and Self-Employment Production; B. Salaried Production; C. Matching Firms; D. Wage and Rental Rate Determination; E. Capital Producers; F. Government, Market Clearing, and Definition of Total Output; IV. Calibration; V. Main Results; A. Business Cycle Dynamics without Macroprudential Policy; B. Business Cycle Dynamics with Macroprudential Policy; C. Additional Results and Robustness; VI. Conclusion; A. Appendix; A.1. Stylized Facts A.2. Value Functions, Nash Bargaining, and Model EquationsA. 2.1. Value Functions and Nash Bargaining; A.2.2. Model Equations; A.3. Calibration Details; A.4. Main Results; A.5. Calibration Parameters for Model with Only Productivity Shocks; References; Footnotes Summary Emerging economies have high shares of self-employed individuals running owner-only firms who, in contrast to many salaried firms, have little access to formal financing and therefore rely on informal financing (input credit) from other firms. We build a small open economy real business cycle model with labor and financial market frictions where formal credit markets, informal credit, and the structure of the labor market interact. The model successfully replicates the cyclical behavior of sectoral employment, formal credit, and the main macroeconomic aggregates in emerging economies. We show that a countercyclical macroprudential policy that reduces formal credit fluctuations has positive though quantitatively limited effects on consumption and output volatility, but generates larger unemployment fluctuations in response to productivity shocks; the same policy increases labor market and aggregate volatility in response to net worth shocks. The link between input credit and the labor market structure---key for capturing the cyclical dynamics of labor and credit markets in the data---plays a crucial role for these results. --Abstract Notes "April 2015." "Institute for Capacity Development." Bibliography Includes bibliographical references (pages 32-35) Notes English Online resource; title from pdf title page (IMF.org Web site, viewed April 13, 2015) Subject Financial risk management -- Developing countries -- Econometric models Crisis management -- Developing countries -- Finance -- Econometric models Financial crises -- Government policy -- Developing countries -- Econometric models Business cycles -- Developing countries -- Econometric models Labor market -- Developing countries -- Econometric models Macroeconomics -- Econometric models. Business cycles -- Econometric models Labor market -- Econometric models Macroeconomics -- Econometric models Developing countries Form Electronic book Author Gonzalez, Andrés, author. International Monetary Fund. Institute for Capacity Development. ISBN 9781484320662 1484320662 9781484320983 1484320980 1475563647 9781475563641

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