Monetary Policy Under Labor Market Power

Anastasia Burya, Rui Mano, Yannick Timmer and Anke Weber

No 2022/128, IMF Working Papers from International Monetary Fund

Abstract: Using the near universe of online vacancy postings in the U.S., we study the interaction between labor market power and monetary policy. We show empirically that labor market power amplifies the labor demand effects of monetary policy, while not disproportionately affecting wage growth. A search and matching model in which firms can attract workers by either offering higher wages or posting more vacancies can rationalize these findings. We also find that vacancy postings that do not require a college degree or technology skills are more responsive to monetary policy, especially when firms have labor market power. Our results help explain the “wageless” recovery after the 2008 financial crisis and the flattening of the wage Phillips curve, especially for the low-skilled, who saw stagnant wages but a robust decline in unemployment.

Keywords: Labor market power; Monetary Policy; Vacancies; Wages; vacancy posting; wage Phillips curve; technology skill; monetary policy shock; Labor markets; Labor demand; Labor share; Unemployment rate; Global; labor demand effects of monetary policy; Employment (search for similar items in EconPapers)
Pages: 46
Date: 2022-07-01
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lma and nep-mon
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Citations: View citations in EconPapers (1)

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