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State-Level Variation in the Real Wage Response to Monetary Policy

Author

Listed:
  • Bryan Perry

    (Massachusetts Institute of Technology)

  • Kerk L Phillips

    (Brigham Young University)

  • David E. Spencer

    (Brigham Young University)

Abstract

This paper investigates the disparate state-level responses of real wages to monetary policy shocks. We report evidence that the response of real wages to monetary policy shocks is slightly procyclical. Using state-level structural vector autoregression models, we find disparity even resulting in some states exhibiting strong procyclical responses and others countercyclical real wage responses. This heterogeneity can be explained by cross-state differences in unemployment, agriculture share in state GDP, the unionization rate, and the importance of intermediate goods in state production. This last effect confirms a hypothesis proffered by Huang, Liu, and Phaneuf (2004).

Suggested Citation

  • Bryan Perry & Kerk L Phillips & David E. Spencer, 2015. "State-Level Variation in the Real Wage Response to Monetary Policy," Annals of Economics and Finance, Society for AEF, vol. 16(1), pages 1-17, May.
    • Handle: RePEc:cuf:journl:y:2015:v:16:i:1:perry
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    References listed on IDEAS

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    Cited by:

    1. Albert, Juan-Francisco & Peñalver, Antonio & Perez-Bernabeu, Alberto, 2020. "The effects of monetary policy on income and wealth inequality in the U.S. Exploring different channels," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 88-106.

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    More about this item

    Keywords

    Real wages; Monetary policy; SVAR models;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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