The Missing Link: Monetary policy and the labor share

Cristiano Cantore, Filippo Ferroni and Miguel Leon-Ledesma

No 1829, Discussion Papers from Centre for Macroeconomics (CFM)

Abstract: The textbook New-Keynesian (NK) model implies that the labor share is pro-cyclical conditional on a monetary policy shock. We present evidence that a monetary policy tightening robustly increased the labor share and decreased real wages and labor productivity during the Great Moderation period in the US, the Euro Area, the UK, Australia, and Canada. We show that this is inconsistent not only with the basic NK model, but with a wide variety of NK models commonly used for monetary policy analysis and where the direct link between the labor share and the markup can be broken down.

Keywords: Labor share; Monetary policy shocks; DSGE models (search for similar items in EconPapers)
JEL-codes: C52 E23 E32 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018-11
New Economics Papers: this item is included in nep-cba and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.centreformacroeconomics.ac.uk/Discussio ... MDP2018-29-Paper.pdf (application/pdf)

Related works:
Journal Article: The Missing Link: Monetary Policy and The Labor Share (2021)
Working Paper: The missing link: monetary policy and the labor share (2020)
Working Paper: The Missing Link: Monetary Policy and The Labor Share (2019)
Working Paper: The missing link: monetary policy and the labor share (2018)
Working Paper: The Missing Link: Monetary Policy and The Labor Share (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cfm:wpaper:1829

Access Statistics for this paper

More papers in Discussion Papers from Centre for Macroeconomics (CFM) Contact information at EDIRC.
Bibliographic data for series maintained by Helen Power ().