Monetary Policy Under Labor Market Power

Author/Editor:

Anastasia Burya ; Rui Mano ; Yannick Timmer ; Anke Weber

Publication Date:

July 1, 2022

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

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.

Series:

Working Paper No. 2022/128

Subject:

Frequency:

regular

English

Publication Date:

July 1, 2022

ISBN/ISSN:

9798400211812/1018-5941

Stock No:

WPIEA2022128

Pages:

46

Please address any questions about this title to publications@imf.org