NBER Working Papers by Pablo Ottonello

This paper offers empirical evidence showing that, relative to "normal" recessions, financial crises hit the labor market by either enhancing the degree of joblessness and/or by further depressing the real wage – a situation that the paper labels "wageless recovery." This holds for a sample of both advanced and emerging-market economies recession episodes, using credit market data prior to the recession episode as instrumental variable for financial crises. Results also indicate that inflation determines the type of recovery: low inflation is associated with jobless recovery, while high inflation is associated with wageless recovery. The paper shows that these outcomes are consistent with a simple model in which collateral requirements are higher (lower), the larger is the share of labor...