Firm level heterogeneity and the impact of monetary policy on labour demand

Gert Bijnens, John Hutchinson and Arthur Saint Guilhem

No 3240, Working Paper Series from European Central Bank

Abstract: Monetary policy asymmetrically affects the response of firms’ employment to an output shock and plays a role in cushioning employment adjustment over the business cycle. Combining annual firm-level data until 2020 with quarterly firm-level data until 2023 and high-frequency monetary policy surprises, we show that for a given change in output, monetary policy influences the extent to which firms hold on to labour, or “labour hoard”. Furthermore, this effect is asymmetric: a restrictive monetary policy reduces labour hoarding behaviour by 2 to 3 times more than an accommodative policy increases it. Finally, we look at the role of financing conditions and firm demographics. JEL Classification: E52, J23, E32

Keywords: employment adjustment; financial constraints; firm-level heterogeneity; labour hoarding; monetary policy transmission (search for similar items in EconPapers)
Date: 2026-05
Note: 688159
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263240

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