English
Valencià
This paper investigates the impact of private credit contractions on labor market performance. Impulse responses for youth, long-term, and overall unemployment are estimated using local linear projections for a panel of 20 OECD countries over the period 1980-2013. The empirical findings suggest that disruptions in the credit market can generate sizable and statistically significant unemployment fluctuations. The impact for youth unemployment is even more pronounced, while lasting effects on long-term unemployment emphasize the existence of a sluggish recovery. Moreover, labor market outcomes depend heavily on the financial leverage of an economy prior to the onset of a credit contraction. These results underline the important relationship between frictions in the financial sector and unemployment.