Uncertainty and the Employment Dynamics of Small and Large Businesses

Author/Editor:

Vivek Ghosal ; Yang Ye

Publication Date:

January 14, 2015

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We examine the impact of uncertainty on employment dynamics. Alternative measures of uncertainty are constructed based on the survey of professional forecasters, and regressionbased forecasting models for GDP growth, inflation, S&P500 stock price index, and fuel prices. Our results indicate that greater uncertainty has a negative impact on growth of employment, and the effects are primarily felt by the relatively smaller businesses; the impact on large businesses are generally non-existent or weaker. Our results suggest that to truly understand the effects of uncertainty on employment dynamics, we need to focus on the relatively smaller and entrepreneurial businesses. We discuss implications for the framing of economic policy.

Series:

Working Paper No. 15/4

Subject:

English

Publication Date:

January 14, 2015

ISBN/ISSN:

9781475552515/1018-5941

Stock No:

WPIEA2015004

Format:

Paper

Pages:

49

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