Post by Tsvetomir P.

Sharing my new working paper with Charles Weise. This research has been at the forefront of my mind for a while now as we worked to disentangle the relationship between monetary policy and racial/ethnic labor market outcomes. Conventionally, U.S. monetary policy is intended to promote price stability and maximum employment at the aggregate level and is conducted largely irrespective of its potentially heterogeneous effects on the economy at a more granular level. Nevertheless, the relationship we study has gained relevance amongst policymakers after, in August 2020, the Federal Reserve pledged to sustain employment that is “broad-based and inclusive”. Our findings are particularly important when considering the current environment of tight monetary policy which, in part, is expected to increase slack in the labor market. Namely, we show that monetary policy and aggregate labor market contractions lead to differential responses of racial labor outcomes, a nonnegligible portion of which do not pertain to differences in underlying individual characteristics. https://lnkd.in/dF5AXkAw