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The disparate labor market impacts of monetary policy

  • Seth B. Carpenter

    (Board of Governors of the Federal Reserve System)

  • William M. Rodgers III
Registered author(s):

    Employing two widely used approaches to identify the effects of monetary policy, this paper explores the differential impact of policy on the labor market outcomes of teenagers, minorities, out-of-school youth, and less-skilled individuals. Evidence from recursive vector autoregressions and autoregressive distributed lag models that use information on the Federal Reserve's contractionary initiatives indicate that the employment-population ratio of minorities is more sensitive to contractionary monetary policy than that of whites. The ratio falls primarily because of an increase in unemployment and not because of a decline in labor force participation. Monetary policy appears to have a disproportionate effect on the unemployment rate of teenagers, particularly African American teenagers. Their employment-population ratios fall because of increased difficulty in obtaining employment. The larger responses are not caused by their higher likelihood of having been employed in industries and occupations that are more sensitive to contractionary monetary policy. © 2004 by the Association for Public Policy Analysis and Management.

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    File URL: http://hdl.handle.net/10.1002/pam.20048
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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of Policy Analysis and Management.

    Volume (Year): 23 (2004)
    Issue (Month): 4 ()
    Pages: 813-830

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    Handle: RePEc:wly:jpamgt:v:23:y:2004:i:4:p:813-830
    Contact details of provider: Web page: http://www3.interscience.wiley.com/journal/34787/home

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    1. Thorbecke, Willem, 2001. "Estimating the effects of disinflationary monetary policy on minorities," Journal of Policy Modeling, Elsevier, vol. 23(1), pages 51-66, January.
    2. Bernanke, Ben S. & Mihov, Ilian, 1995. "Measuring Monetary Policy," Economics Series 10, Institute for Advanced Studies.
    3. James R. Hines Jr. & Hilary W. Hoynes & Alan B. Krueger, 2001. "Another Look at Whether a Rising Tide Lifts All Boats," NBER Working Papers 8412, National Bureau of Economic Research, Inc.
    4. Vivek Moorthy, 1988. "On demographic adjustments to estimates of the natural rate of unemployment: a note," Working Papers in Applied Economic Theory 88-01, Federal Reserve Bank of San Francisco.
    5. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
    6. M. Badgett, 1994. "Rising black unemployment: Changes in job stability or in employability?," The Review of Black Political Economy, Springer, vol. 22(3), pages 55-75, March.
    7. Romer, Christina D. & Romer, David H., 1994. "Monetary policy matters," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 75-88, August.
    8. Harry J. Holzer & Paul Offner, 2001. "Trends in Employment Outcomes of Young Black Men, 1979-2000," JCPR Working Papers 245, Northwestern University/University of Chicago Joint Center for Poverty Research.
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