Firm level heterogeneity and the impact of monetary policy on labour demand

Gert Bijnens, John Hutchinson () and Arthur Saint Guilhem ()
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John Hutchinson: European Central Bank
Arthur Saint Guilhem: DGSEI DEMFI

No 489, Working Paper Research from National Bank of Belgium

Abstract: Monetary policy asymmetrically affects the response of firms’ employment to an output shock and plays a role in cushioning employment adjustment over the business cycle. Combining annual firm level data until 2020 with quarterly firm-level data until 2023 and high frequency monetary policy surprises, we show that for a given change in output, monetary policy influences the extent to which firms hold on to labour, or “labour hoard”. Furthermore, this effect is asymmetric: a restrictive monetary policy reduces labour hoarding behaviour by 2 to 3 times more than an accommodative policy increases it. Finally, we look at the role of financing conditions and firm demographics.

Keywords: Labour hoarding; Monetary policy transmission; Firm-level heterogeneity; Employment adjustment; Financial constraints. (search for similar items in EconPapers)
JEL-codes: E32 E52 J23 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2026-03
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:reswpp:202603-489

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