Monetary Policy Shocks and the Employment of Young, Middle-Aged, and Old Workers

Fumitaka Nakamura, Nao Sudo and Yu Sugisaki
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Fumitaka Nakamura: Bank of Japan
Nao Sudo: Bank of Japan
Yu Sugisaki: Bank of Japan

International Journal of Central Banking, 2026, vol. 22, issue 3, 165-206

Abstract: We study how monetary policy affects the labor status of people of different ages and genders, using Japanese data spanning the late 1990s to the late 2010s, with monetary policy shocks identified using high-frequency market data. We first demonstrate that expansionary monetary policy shocks reduce the number of unemployed of all ages in both genders by almost the same amount. We then show that the impacts of these shocks are starkly different across ages in terms of responses in the labor force and number of employed. Specifically, expansionary monetary policy shocks induce the young and elderly demographics who were previously outside the labor force to enter the labor market, thereby increasing the employed population within these age brackets while exerting lesser influence on the middle-aged cohort. These findings suggest that changes in the labor force participation rate could play an important role in determining the degree of labor market slack for specific ages, potentially leading to a relatively limited wage increase to expansionary monetary policy shocks through the composition effect.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ijc:ijcjou:y:2026:q:3:a:4

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