Quotation Fritsche, Jan Philipp, Steininger, Lea. 2021. Zooming in on Monetary Policy - The Labor Share and Production Dynamics of Two Million Firms.


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Abstract

Conditional on a contractionary monetary policy shock, the labor share of value added is expected to decrease in the basic New Keynesian model. By providing firm-level evidence, we are first to validate this proposition. Using local projections and high dimensional fixed effects, we show that a one standard deviation contractionary monetary policy shock decreases firms' labor share by 0.4 percent, on average. However, reactions are heterogeneous along two dimensions: The labor share is most informative to discriminate firms by their response in payroll expenses, firms' leverage is most informative to discriminate by their response in value added. We inform the policy debate on transmission and redistribution effects of monetary policy.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Zooming in on Monetary Policy - The Labor Share and Production Dynamics of Two Million Firms
Year 2021
URL https://www.diw.de/de/diw_01.c.823390.de/publikationen/diskussionspapiere/2021_1967/zooming_in_on_monetary_policy_-_the_labor_share_and_production_dynamics_of_two_million_firms.html
JEL D22;D31;E23;E32;C52

Associations

People
Steininger, Lea (Details)
External
Fritsche, Jan Philipp (DIW Berlin, Germany)
Organization
Department of Economics (Badinger) (Details)
Department of Economics (PhD) (Details)
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