The heterogeneous impact of monetary policy on the US labor market

Zens, Gregor ORCID: and Böck, Maximilian ORCID: and Zörner, Thomas O. ORCID: (2020) The heterogeneous impact of monetary policy on the US labor market. Journal of Economic Dynamics and Control, 119. p. 103989. ISSN 01651889

Available under License Creative Commons: Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0).

Download (1MB) | Preview


We empirically investigate the role of central banks in the context of heterogeneous labor markets, jobless recoveries and job polarization. Specifically, we estimate the effect of monetary policy on the US labor market using disaggregated time series based on large scale survey data. The impact of interest rate changes on unemployment in 32 occupation groups is explored in a Bayesian factor-augmented vector autoregression framework. The results suggest largely heterogeneous impacts across various occupation groups. This heterogeneity can be explained by differential task profiles of the workers in their respective occupations. Workers with tasks that are easily automated or offshored as well as workers at the bottom of the skill distribution are disproportionately affected following a monetary policy shock. This implies that labor market participants that are highly vulnerable to structural developments such as skill-biased technological change and the globalization of labor markets are also most sensitive to conventionalmonetary policy measures. From a policy perspective, we conclude that central banks are unlikely to beable to take on a stabilizing role in the context of labor market polarization.

Item Type: Article
Additional Information: Thomas Zörner gratefully acknowledges financial support by funds of the Oesterreichische Nationalbank (Austrian Central Bank, Anniversary Fund, project number: 17650).
Keywords: Monetary policy, Job polarization, Jobless recoveries, Occupation-level, FAVAR
Classification Codes: JEL C11, C32, E24, E52
Divisions: Departments > Volkswirtschaft
Version of the Document: Published
Depositing User: ePub Administrator
Date Deposited: 11 Sep 2020 09:18
Last Modified: 21 Dec 2020 15:55
Related URLs:


View Item View Item


Downloads per month over past year

View more statistics