Credit Shocks and the European Labour Market

31 Pages Posted: 8 May 2018

See all articles by Katalin Bodnár

Katalin Bodnár

European Central Bank (ECB)

Ludmila Fadejeva

Latvijas Banka

Marco Hoeberichts

De Nederlandsche Bank - Research Department

Mario Izquierdo

Banco de España

Christophe Jadeau

Banque de France

Eliana Viviano

Bank of Italy

Multiple version iconThere are 3 versions of this paper

Date Written: May 2, 2018

Abstract

More than five years after the start of the Sovereign debt crisis in Europe, its impact on labour market outcomes is not clear. This paper aims to fill this gap. We use qualitative firm-level data for 24 European countries, collected within the Wage Dynamics Network (WDN) of the ESCB. We first derive a set of indices measuring difficulties in accessing the credit market for the period 2010-13. Second, we provide a description of the relationship between credit difficulties and changes in labour input both along the extensive and the intensive margins as well as on wages. We find strong and significant correlation between credit difficulties and adjustments along both the extensive and the intensive margin. In the presence of credit market difficulties, firms cut wages by reducing the variable part of wages. This evidence suggests that credit shocks can affect not only the real economy, but also nominal variables.

Keywords: credit difficulties, labour input adjustment, intensive margin

JEL Classification: D53, E24, E44, G31, G32

Suggested Citation

Bodnár, Katalin and Fadejeva, Ludmila and Hoeberichts, Marco M. and Izquierdo, Mario and Jadeau, Christophe and Viviano, Eliana, Credit Shocks and the European Labour Market (May 2, 2018). De Nederlandsche Bank Working Paper No. 591. Available at SSRN: https://ssrn.com/abstract=3173577 or http://dx.doi.org/10.2139/ssrn.3173577

Katalin Bodnár

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Ludmila Fadejeva

Latvijas Banka ( email )

Riga
Latvia

Marco M. Hoeberichts (Contact Author)

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands
+31-20-524 2890 (Phone)
+31-20-524 2529 (Fax)

Mario Izquierdo

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Christophe Jadeau

Banque de France ( email )

Paris
France

Eliana Viviano

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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