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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: E23 E32 C52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mac
Date: 2018-11
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Related works:
Working Paper: The Missing Link: Monetary Policy and The Labor Share (2019) Downloads
Working Paper: The missing link: monetary policy and the labor share (2018) Downloads
Working Paper: The Missing Link: Monetary Policy and The Labor Share (2018) Downloads
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