Effects of monetary policy on labour income: the role of the employer

Alina Bobasu and Amalia Repele

Research Bulletin, 2025, vol. 129

Abstract: This article investigates how firms transmit monetary policy shocks to individual labour market outcomes at both the intensive and extensive margins. Using matched employer-employee administrative data from Germany, we study the effects of monetary policy shocks on individual employment and of labour income conditioning on characteristics of workers and firms. First, we find that the employment of workers at young firms is especially sensitive to monetary policy shocks. Second, wages of workers at large firms react more than those at small firms, with some pronounced asymmetries – differences between large and small firms are more evident during monetary policy easing. The differential wage response is driven by workers earning above-median wages and cannot be fully explained by a worker component. Notably, larger firms adjust wages more significantly despite experiencing similar changes in investment and turnover compared to smaller firms. JEL Classification: E52, F41, Q43

Keywords: employment; labour market; monetary policy; workers type (search for similar items in EconPapers)
Date: 2025-03
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