Can Monetary Policy Influence Employment? The case of West African States

Alexandre Assemien, Jacques Esso () and Kouamé D. Kanga

Revue d'économie politique, 2019, vol. 129, issue 5, 777-813

Abstract: This paper aims at analysing the impact of monetary policy shock on employment in the West African Economic and Monetary Union. We first propose a DSGE model to understand the link between monetary policy and employment. The model incorporates labour market frictions. We find that the effect of monetary policy on employment depends on the labour market characteristics namely the job destruction rate and the bargaining power of firms (or workers). We show that an expansionary monetary policy shock increases employment, stock of capital (investment) and job finding probability. To verify the theoretical results, we estimate a structural panel VAR and find that an expansionary monetary policy shock increases employment as well as stock of capital and households consumption. Moreover, using another structural panel VAR which allows cross-sectional heterogeneity of the response dynamics, we highlight heterogeneous responses of employment and macroeconomic variables to a monetary shock. Classification JEL : C33, C36, E24, E52

Keywords: WAEMU; Panel VAR; DSGE; Monetary policy; Employment (search for similar items in EconPapers)
JEL-codes: C33 C36 E24 E52 (search for similar items in EconPapers)
Date: 2019
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