Heterogeneous Labor Market Effects of Monetary Policy

When: 04 Oct 2021, 15:00-16:15
Where: Zoom
Speaker: Michael Weber

To enter the virtual seminar room, please use the following login credentials:

Zoom URL: https://uni-frankfurt.zoom.us/j/99351626031?pwd=TDBnb0xEdEx6NHI5L1M3N1ArSkUxZz09
Meeting ID: 993 5162 6031
Password: 544607

Abstract:
This paper analyzes the heterogeneous effects of monetary policy on workers with different levels of labor force attachment. Exploiting variation in labor market tightness across metropolitan areas, we show that the employment of populations with lower labor force attachment–Blacks, high school dropouts, and women–is more responsive to expansionary monetary policy in tighter labor markets. We develop a New Keynesian model with heterogeneous workers that explains these results. The model shows that expansionary monetary shocks lead to larger and more persistent increases in the employment of low attachment populations when the central bank follows an average inflation targeting rule and when the Phillips curve is flatter. These findings suggest that, by tightening labor markets, the Federal Reserve’s recent move from a strict to an average inflation targeting framework will especially benefit workers with lower labor force attachment.

Paper

Top