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Firm level heterogeneity and the impact of monetary policy on labour demand

Author

Listed:
  • Gert Bijnens

    (National Bank of Belgium, Research Department)

  • John Hutchinson

    (European Central Bank)

  • Arthur Saint Guilhem

    (DGSEI DEMFI)

Abstract

Monetary policy asymmetrically affects the response of firms’ employment to an output shock and plays a role in cushioning employment adjustment over the business cycle. Combining annual firm level data until 2020 with quarterly firm-level data until 2023 and high frequency monetary policy surprises, we show that for a given change in output, monetary policy influences the extent to which firms hold on to labour, or “labour hoard”. Furthermore, this effect is asymmetric: a restrictive monetary policy reduces labour hoarding behaviour by 2 to 3 times more than an accommodative policy increases it. Finally, we look at the role of financing conditions and firm demographics.

Suggested Citation

  • Gert Bijnens & John Hutchinson & Arthur Saint Guilhem, 2026. "Firm level heterogeneity and the impact of monetary policy on labour demand," Working Paper Research 489, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:202603-489
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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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