0000000000671668
AUTHOR
Dominique Guillaume
Banking crises, labor reforms, and unemployment
Abstract Using a sample of 97 countries spanning the period 1980–2008, we estimate that banking crises have, on average, a large negative impact on unemployment. This effect, however, largely depends on the flexibility of labor market institutions: while in countries with more flexible labor markets the impact of banking crises is sharper but short-lived, in countries with more rigid labor markets the effect is initially more subdued but highly persistent. These effects are even larger for youth unemployment in the short term, and long-term unemployment in the medium term. Conversely, large upfront, or gradual but significant, comprehensive market reforms have a positive impact on unemploym…
A reply to "banking crises, labor reforms, and unemployment: A comment"
Aleksynka (2015) points to some important methodological flaws in the labor market indicators data used in Bernal-Verdugo, Furceri and Guillaume (2013) [BFG]. This paper revisits the empirical findings presented in BFG, and shows that the results and conclusions are little affected by these methodological flaws. In particular, we find that: (i) while in countries with more flexible labor markets the impact of banking crises is sharper but short-lived, in countries with more rigid labor markets the effect is initially more subdued but highly persistent; (ii) comprehensive labor market reforms have a positive impact on unemployment, albeit only in the medium term.