{
  "title": "Macroprudential Policy and Labor Market Dynamics in Emerging Economies",
  "publication": "IMF Working Papers, April 3, 2015",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/macroprudential-policy-and-labor-market-dynamics-in-emerging-economies-42838",
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  "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.",
  "sections": [
    {
      "heading": "Overview and research question",
      "content": "- Authors: Alan Finkelstein Shapiro, Andres Gonzalez\n- Publication date: April 3, 2015\n- Publication type: IMF Working Paper (Working Paper No. 2015/078, Issue: 078, Volume: 2015)\n- Pages: 48\n- DOI: https://doi.org/10.5089/9781475563641.001\n- Stock No: WPIEA2015078\n- ISBN: 9781475563641\n- ISSN: 1018-5941\n- Core question: How do formal credit markets, informal input credit, and the structure of the labor market interact in emerging economies, and what are the macroeconomic and labor-market effects of countercyclical macroprudential policy?"
    },
    {
      "heading": "Model and methodology",
      "content": "- Model type:\n  - Small open economy real business cycle model with labor and financial market frictions.\n- Key model ingredients:\n  - Formal credit markets.\n  - Informal financing (input credit) used by owner-only self-employed firms.\n  - Labor market structure distinguishing self-employment (owner-only firms) and salaried firms.\n  - Interaction among formal credit, informal credit, and labor market frictions.\n- Empirical fit:\n  - The model successfully replicates the cyclical behavior of sectoral employment, formal credit, and the main macroeconomic aggregates in emerging economies."
    },
    {
      "heading": "Main findings",
      "content": "- Role of self-employment and input credit:\n  - Emerging economies have high shares of self-employed individuals running owner-only firms with limited access to formal financing and reliance on informal input credit from other firms.\n  - The link between input credit and the labor market structure is key for capturing cyclical dynamics of labor and credit markets in the data.\n- Effects of countercyclical macroprudential policy:\n  - A countercyclical macroprudential policy that reduces formal credit fluctuations has positive though quantitatively limited effects on consumption and output volatility.\n  - The same countercyclical policy generates larger unemployment fluctuations in response to productivity shocks.\n  - The countercyclical policy increases labor market and aggregate volatility in response to net worth shocks."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Trade-offs of countercyclical macroprudential tools:\n  - Reducing formal credit volatility can modestly stabilize consumption and output but may exacerbate unemployment volatility under productivity shocks.\n  - Countercyclical tightening can increase both labor market and aggregate volatility when shocks originate from net worth.\n- Importance for emerging economies:\n  - Policy design should account for high prevalence of owner-only self-employment and reliance on informal input credit, as these features materially alter transmission of macroprudential measures to labor market outcomes.\n\nIMF Working Paper: \"Macroprudential Policy and Labor Market Dynamics in Emerging Economies\" by Alan Finkelstein Shapiro and Andres Gonzalez (April 3, 2015), Working Paper No. 2015/078, Pages: 48, DOI: https://doi.org/10.5089/9781475563641.001\n\n---\n\n Content in this bundle\n\n- wp1578 - References\n  - wp1578 - References (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1578 - References (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/macroprudential-policy-and-labor-market-dynamics-in-emerging-economies-42838"
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    "Authors: Alan Finkelstein Shapiro, Andres Gonzalez",
    "Published: April 3, 2015",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781475563641.001",
    "Authors: Alan Finkelstein Shapiro, Andres Gonzalez",
    "Publication date: April 3, 2015",
    "Publication type: IMF Working Paper (Working Paper No. 2015/078, Issue: 078, Volume: 2015)",
    "Pages: 48",
    "DOI: https://doi.org/10.5089/9781475563641.001",
    "Stock No: WPIEA2015078",
    "ISBN: 9781475563641",
    "ISSN: 1018-5941",
    "Core question: How do formal credit markets, informal input credit, and the structure of the labor market interact in emerging economies, and what are the macroeconomic and labor-market effects of countercyclical macroprudential policy?",
    "Model type:",
    "Key model ingredients:",
    "Empirical fit:",
    "Role of self-employment and input credit:",
    "Effects of countercyclical macroprudential policy:",
    "Trade-offs of countercyclical macroprudential tools:",
    "Importance for emerging economies:",
    "**_wp1578 - References**"
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