Advertisement

Monetary shocks and job flows: evidence from disaggregated data

  • Mohamad B. Karaki
Article
  • 14 Downloads

Abstract

This paper uses a structural near-VAR to examine the effect of monetary shocks on industry-level job creation and job destruction. I find asymmetry in the job flows’ responses to a positive monetary shock for disaggregated industries in the manufacturing, mining and services sectors. These findings indicate that monetary shocks trigger changes in job reallocation and point that monetary policy has important allocative effects. Yet, a test for the absence of job reallocation reveals that monetary shocks have a significant effect on job reallocation for a limited number of industries within these sectors. Moreover, this effect becomes largely insignificant after accounting for data mining.

Keywords

Monetary shocks Job flows Asymmetry 

JEL Classification

E24 E32 E52 

Notes

Compliance with ethical standards

Conflict of interest

Mohamad B. Karaki declares that he has no conflict of interest.

Ethical approval

This article does not contain any studies with human participants or animals performed by the author.

References

  1. Alsalman Z, Herrera AM (2015) Oil price shocks and the U.S. stock market: do sign and size matter? Energy J 36(3):171–188Google Scholar
  2. Ball L (1999) Policy rules for open economies. In: Taylor JB (ed) Monetary policy rules. University of Chicago Press, ChicagoGoogle Scholar
  3. Barth MJ, Ramey VA (2001) The cost channel of monetary transmission. In: Bernanke BS, Rotemberg J (eds) NBER macroeconomics annual 2001. University of Chicago Press, Chicago, pp 199–256Google Scholar
  4. Bloomberg News (2010) Fed’s Yellen says job creation is high priority. 15 July 2010Google Scholar
  5. Bouakez H, Cardia E, Ruge-Murcia F (2009) The transmission of monetary policy in a multisector economy. Int Econ Rev 50(4):1243–1266CrossRefGoogle Scholar
  6. Campbell J (1997) Cyclical job creation, job destruction and monetary policy. Mimeo, University of RochesterGoogle Scholar
  7. Christiano LJ, Eichenbaum M, Evans CL (1999) Monetary policy shocks: what have we learned and to what end? Handb Macroecon 1:65–148CrossRefGoogle Scholar
  8. Cuñat A, Melitz MJ (2012) Volatility, labor market flexibility, and the pattern of comparative advantage. J Eur Econ Assoc 10(2):225–254CrossRefGoogle Scholar
  9. Davis S, Haltiwanger J (1992) Gross job creation, gross job destruction, and employment reallocation. Q J Econ 107(3):819–63CrossRefGoogle Scholar
  10. Davis SJ, Haltiwanger J (1996) Driving forces and employment fluctuations. NBER working paper no. 5775Google Scholar
  11. Davis SJ, Haltiwanger J, Schuh S (1996) Job creation and destruction. MIT Press, CambridgeGoogle Scholar
  12. Davis SJ, Haltiwanger J (2001) Sectoral job creation and destruction responses to oil price changes. J Monet Econ 48:465–512CrossRefGoogle Scholar
  13. Davis SJ, Haltiwanger J (2014) Labor market fluidity and economic performance. NBER working paper 20479Google Scholar
  14. Dedola L, Lippi F (2005) The monetary transmission mechanism: evidence from the industries of five OECD countries. Eur Econ Rev 49:1543–1569CrossRefGoogle Scholar
  15. Edelstein P, Kilian L (2007) The response of business fixed investment to changes in energy prices: a test of some hypotheses about the transmission of energy price shocks. BE J Macroecon 7(1):1–39Google Scholar
  16. Edelstein P, Kilian L (2009) How sensitive are consumer expenditures to retail energy prices? J Monet Econ 56(6):766–779CrossRefGoogle Scholar
  17. Fernald JG (2014) A quarterly, utilization-adjusted series on total factor productivity. Working paper 2012-19, Federal Reserve Bank of San FranciscoGoogle Scholar
  18. Garibaldi P (1997) The asymmetric effects of monetary policy on job creation and destruction. IMF Staff Pap 44(4):557–84CrossRefGoogle Scholar
  19. Garín J, Pries M, Sims E (2013) Reallocation and the changing nature of economic fluctuations. Working paper, University of Notre DameGoogle Scholar
  20. Gilchrist S, Zakrajek E (2012) Credit spreads and business cycle fluctuations. Am Econ Rev 102(4):1692–1720CrossRefGoogle Scholar
  21. Giordani P (2004) An alternative explanation of the price puzzle. J Monet Econ 51:1271–1296CrossRefGoogle Scholar
  22. Hamilton JD (1988) A neoclassical model of unemployment and the business cycle. J Polit Econ 96:593–617CrossRefGoogle Scholar
  23. Herrera AM (2018) Oil price shocks, inventories, and macroeconomic dynamics. Macroecon Dyn 22(3):620–639CrossRefGoogle Scholar
  24. Herrera AM, Lagalo LG, Wada T (2011) Oil price shocks and industrial production: is the relationship linear? Macroecon Dyn 15(S3):472–497CrossRefGoogle Scholar
  25. Herrera AM, Lagalo LG, Wada T (2015) Asymmetries in the response of economic activity to oil price increases and decreases? J Int Money Finance 50:108–133CrossRefGoogle Scholar
  26. Herrera AM, Karaki MB (2015) The effects of oil price shocks on job reallocation. J Econ Dyn Control 61:95–113CrossRefGoogle Scholar
  27. Herrera AM, Karaki MB, Rangaraju SK (2017) Where do jobs go when oil prices drop? Energy Econ 64:469–482CrossRefGoogle Scholar
  28. Inoue A, Kilian L (2004) In-sample or out-of-sample tests of predictability: which one should we use? Econ Rev 23(4):371–402CrossRefGoogle Scholar
  29. Irvine FO, Schuh S (2007) Interest sensitivity and volatility reductions: cross-section evidence. Int J Prod Econ 108(1–2):31–42CrossRefGoogle Scholar
  30. Jackman R, Sutton J (1982) Imperfect capital markets and the monetarist black box: liquidity constraints, inflation and the asymmetric effects of interest rate policy. Econ J 92(March):108–128CrossRefGoogle Scholar
  31. Karaki MB (2018) Oil prices and state unemployment. Energy J 39(3):25–49CrossRefGoogle Scholar
  32. Kilian L, Vega C (2011) Do energy prices respond to U.S. macroeconomic news? A test of the hypothesis of predetermined energy prices. Rev Econ Stat 93(2):660–671CrossRefGoogle Scholar
  33. Kilian L, Vigfusson RJ (2011) Are the responses of the U.S. economy asymmetric in energy price increases and decreases? Quant Econ 2(3):419–453CrossRefGoogle Scholar
  34. Kilian L, Vigfusson RJ (2017) The role of oil price shocks in causing US recessions. J Money Credit Bank 49(8):1747–1776CrossRefGoogle Scholar
  35. Mehrotra N, Sergeyev D (2015) Financial shocks and job flows. In: 2015 meeting papers, society for economic dynamics, 520Google Scholar
  36. Micco A, Pagés C (2004) Employment protection and gross job flows: a differences-in-differences approach. RES working papers 4365, Inter-American Development Bank, Research DepartmentGoogle Scholar
  37. Ramey VA, Vine DJ (2010) Oil, automobiles, and the U.S. economy: how much things have really changed? NBER macroeconomics annual 2011Google Scholar
  38. Romer D (2000) Keynesian macroeconomics without the LM curve. J Econ Perspect 14:149–169CrossRefGoogle Scholar
  39. Svensson LEO (1997) Inflation forecast targeting: implementing and monitoring inflation targets. Eur Econ Rev 41:1111–1146CrossRefGoogle Scholar
  40. Svensson LEO (2000) Open economy inflation targeting. J Int Econ 50:155–183CrossRefGoogle Scholar
  41. Svensson LEO (2001) The zero bound in an open economy: a foolproof way of escaping from a liquidity trap. Monet Econ Stud 19:277–312Google Scholar
  42. Sims CA (2012) Statistical modeling of monetary policy and its effects. Am Econ Rev 102(4):1187–1205CrossRefGoogle Scholar
  43. Wu JC, Xia FD (2016) Measuring the macroeconomic impact of monetary policy at the zero lower bound. J Money Credit Bank 48(2–3):253–291CrossRefGoogle Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of Economics, 1515 Adnan Kassar School of BusinessLebanese American UniversityBeirutLebanon

Personalised recommendations