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Effects of financial frictions on employment: Evidence from Japan during the Global Financial Crisis

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  • Fukuda, Akira

Abstract

This study examines the impact of a large credit shock on employment in Japan during the Global Financial Crisis in 2008–2009. To identify which firms faced a serious credit shock, we used variations in the long-term debt that must be repaid in the crisis. Because long-term debt takes more than one year to mature, it was determined independently of employment adjustments during the crisis. Therefore, using long-term debt maturing in a crisis, it is possible to identify the impact of exogenous tightening of the borrowing constraint on employment. We found that companies with a higher ratio of long-term debt maturing during the crisis had a greater negative impact on employment. In particular, the impact increased as the period passed from the shock, and this feature was most conspicuous in the group with the highest proportion of long-term debt maturing in the crisis.

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  • Fukuda, Akira, 2022. "Effects of financial frictions on employment: Evidence from Japan during the Global Financial Crisis," Journal of the Japanese and International Economies, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:jjieco:v:65:y:2022:i:c:s0889158322000235
    DOI: 10.1016/j.jjie.2022.101213
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    More about this item

    Keywords

    Borrowing constraint; Labor adjustment; Global Financial Crisis;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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