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Monetary policy and racial unemployment rates

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  • Madeline Zavodny
  • Tao Zha

Abstract

When the Federal Open Market Committee began raising interest rates in June 1999 to forestall inflationary pressures, concern mounted that monetary policy moves might slow the pace of economic growth, undoing the employment gains minorities and other disadvantaged groups made during the 1990s. Implicit in such concern is the idea that these groups will be disproportionately affected by an economic slowdown. ; To explore this issue, this article analyzes the effect of exogenous movements in monetary policy and other macroeconomic variables on the overall and black unemployment rates. These exogenous movements are shifts in the federal funds rate not explained by movements in the other variables included in the econometric model estimated here. The analysis focuses on how the implementation of exogenous monetary policy during the 1980s and 1990s affected the black unemployment rate relative to the overall unemployment rate. Results suggest that the black unemployment rate tends to be slightly more responsive to exogenous monetary policy moves than the overall unemployment rate is. However, exogenous monetary policy moves during the 1980s and 1990s did not have significantly more adverse effects on African Americans than on the total population and may even have had positive net effects on African Americans.

Suggested Citation

  • Madeline Zavodny & Tao Zha, 2000. "Monetary policy and racial unemployment rates," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 1-16.
  • Handle: RePEc:fip:fedaer:y:2000:i:q4:p:1-16:n:v.85no.4
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    References listed on IDEAS

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    1. Lester C. Thurow, 1966. "The Changing Structure of Unemployment: An Econometric Study," The American Economist, Sage Publications, vol. 10(1), pages 92-92, March.
    2. Leeper, Eric M. & Zha, Tao, 2003. "Modest policy interventions," Journal of Monetary Economics, Elsevier, vol. 50(8), pages 1673-1700, November.
    3. Eric M. Leeper & Tao Zha, 2001. "Assessing simple policy rules: A view from a complete macroeconomic model," Economic Review, Federal Reserve Bank of Atlanta, issue Q4, pages 35-58.
    4. John C. Robertson & Ellis W. Tallman, 1999. "Vector autoregressions: forecasting and reality," Economic Review, Federal Reserve Bank of Atlanta, issue Q1, pages 4-18.
    5. Sims, Christopher A & Zha, Tao, 1998. "Bayesian Methods for Dynamic Multivariate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 949-968, November.
    6. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
    7. Leslie S. Stratton, 1993. "Racial Differences in Men's Unemployment," ILR Review, Cornell University, ILR School, vol. 46(3), pages 451-463, April.
    8. Abowd, John M & Killingsworth, Mark R, 1984. "Do Minority-White Unemployment Differences Really Exist?," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(1), pages 64-72, January.
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    Cited by:

    1. M. Hakan Berument & Nukhet Dogan & Aysit Tansel, 2009. "Macroeconomic Policy and Unemployment by Economic Activity: Evidence from Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 45(3), pages 21-34, May.
    2. Herve Queneau & Amit Sen, 2009. "Regarding the unemployment gap by race and gender in the United States," Economics Bulletin, AccessEcon, vol. 29(4), pages 2749-2757.
    3. M. Hakan Berument & Nukhet Dogan & Aysit Tansel, 2009. "Macroeconomic Policy and Unemployment by Economic Activity: Evidence from Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 45(3), pages 21-34, May.
    4. Queneau, Hervé & Sen, Amit, 2012. "On the structure of US unemployment disaggregated by race, ethnicity, and gender," Economics Letters, Elsevier, vol. 117(1), pages 91-95.

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    Keywords

    Unemployment ; Labor supply ; Labor turnover;

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