The Missing Link: Monetary Policy and The Labor Share

León-Ledesma, Miguel, Cristiano Cantore and Filippo Ferroni
Authors registered in the RePEc Author Service: Miguel Leon-Ledesma

No 13551, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Labor share; Monetary policy shocks (search for similar items in EconPapers)
JEL-codes: C52 E23 E32 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-cba, nep-dge, nep-eec, nep-lab, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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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 (2018)
Working Paper: The missing link: monetary policy and the labor share (2018)
Working Paper: The Missing Link: Monetary Policy and The Labor Share (2018)
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