The heterogeneous impact of monetary policy on the US labor market

Gregor Zens, Maximilian Böck, Thomas Zörner

Publication: Scientific journalJournal articlepeer-review

65 Downloads (Pure)


We empirically investigate the role of central banks in the context of heterogeneous labor markets, jobless recoveries and job polarization. Specifically, we estimate the effect of monetary policy on the US labor market using disaggregated time series based on large scale survey data. The impact of interest rate changes on unemployment in 32 occupation groups is explored in a Bayesian factor-augmented vector autoregression framework. The results suggest largely heterogeneous impacts across various occupation groups. This heterogeneity can be explained by differential task profiles of the workers in their respective occupations. Workers with tasks that are easily automated or offshored as well as workers at the bottom of the skill distribution are disproportionately affected following a monetary policy shock. This implies that labor market participants that are highly vulnerable to structural developments such as skill-biased technological change and the globalization of labor markets are also most sensitive to conventional monetary policy measures. From a policy perspective, we conclude that central banks are unlikely to be able to take on a stabilizing role in the context of labor market polarization.
Original languageEnglish
JournalJournal of Economic Dynamics & Control
Publication statusPublished - 2020

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 101026 Time series analysis
  • 502025 Econometrics
  • 502047 Economic theory
  • 502018 Macroeconomics

Cite this