Inclusive Monetary Policy: How Tight Labor Markets Facilitate Broad-Based Employment Growth

Nittai Bergman, Benjamin Born, David A. Matsa and Michael Weber

No 29651, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the heterogeneous effects of monetary policy on workers with differing levels of labor-force attachment. Exploiting variation in labor market tightness across metropolitan areas, we show 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. The effect builds up over time and is long-lasting. We replicate these results in a New Keynesian model with heterogeneous workers. In the model, expansionary monetary shocks lead to larger increases in the employment of less attached workers when the central bank follows a more dovish monetary policy and when the Phillips curve is flatter. These findings suggest that a more hawkish monetary policy especially hurts the employment prospects of workers with lower labor force attachment.

JEL-codes: E12 E24 E31 E43 E52 E58 J24 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-lma, nep-mac and nep-mon
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Working Paper: Inclusive Monetary Policy: How Tight Labor Markets Facilitate Broad-Based Employment Growth (2022)
Working Paper: Inclusive Monetary Policy: How Tight Labor Markets Facilitate Broad-Based Employment Growth (2022)
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