State-Level Variation in the Real Wage Response to Monetary Policy

Bryan Perry (), Kerk Phillips and David Spencer
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Bryan Perry: Massachusetts Institute of Technology
Kerk Phillips: Brigham Young University

Annals of Economics and Finance, 2015, vol. 16, issue 1, 1-17

Abstract: This paper investigates the disparate state-level responses of real wages to monetary policy shocks. We report evidence that the response of real wages to monetary policy shocks is slightly procyclical. Using state-level structural vector autoregression models, we find disparity even resulting in some states exhibiting strong procyclical responses and others countercyclical real wage responses. This heterogeneity can be explained by cross-state differences in unemployment, agriculture share in state GDP, the unionization rate, and the importance of intermediate goods in state production. This last effect confirms a hypothesis proffered by Huang, Liu, and Phaneuf (2004).

Keywords: Real wages; Monetary policy; SVAR models (search for similar items in EconPapers)
JEL-codes: E10 E32 E52 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2015:v:16:i:1:perry

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