Financial system stress and unemployment in industrial countries

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Purpose. This paper analyzes how financial system turmoil affected unemployment in industrial countries during the period 1982 to 2003.
Design/methodology/approach. The paper uses annual data on 17 industrial countries. It employs the IMF’s financial stress index and a large number of controls.
Findings. The paper finds that, during the sample period, financial market turmoil had only moderate adverse effects on unemployment. Stress in the banking sector and stress in foreign exchange markets were particularly likely to increase unemployment, although the relevant effects were modest too. Turmoil in securities markets affected unemployment only slightly. The results are robust to variations in specification.
Originality/value. While previous papers only look at a small number of banking crises, this paper’s sample includes crises in all major areas of the financial sector. Furthermore, whereas previous papers cover only major crises, it additionally takes both minor ones and periods of relative calm into account. Finally, this paper is the first to statistically control for the impact of all major determinants of labor market performance.
Original languageEnglish
Pages (from-to)504-527
Number of pages24
JournalJournal of Economic Studies
Volume38
Issue number5
DOIs
Publication statusPublished - 2011

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Unemployment
Developed countries
Financial system
Labour market
Banking sector
Banking crisis
Financial sector
Foreign exchange market
Financial stress index
Securities market
Design methodology
Financial markets
Market performance

Cite this

Financial system stress and unemployment in industrial countries. / Feldmann, Horst.

In: Journal of Economic Studies, Vol. 38, No. 5, 2011, p. 504-527.

Research output: Contribution to journalArticle

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