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Effects of monetary policy on labour income: the role of the employer

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  • Bobasu, Alina
  • Repele, Amalia

Abstract

This article investigates how firms transmit monetary policy shocks to individual labour market outcomes at both the intensive and extensive margins. Using matched employer-employee administrative data from Germany, we study the effects of monetary policy shocks on individual employment and of labour income conditioning on characteristics of workers and firms. First, we find that the employment of workers at young firms is especially sensitive to monetary policy shocks. Second, wages of workers at large firms react more than those at small firms, with some pronounced asymmetries – differences between large and small firms are more evident during monetary policy easing. The differential wage response is driven by workers earning above-median wages and cannot be fully explained by a worker component. Notably, larger firms adjust wages more significantly despite experiencing similar changes in investment and turnover compared to smaller firms. JEL Classification: E52, F41, Q43

Suggested Citation

  • Bobasu, Alina & Repele, Amalia, 2025. "Effects of monetary policy on labour income: the role of the employer," Research Bulletin, European Central Bank, vol. 129.
    • Handle: RePEc:ecb:ecbrbu:2025:0129:
    as

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    References listed on IDEAS

    as
    1. Marek Jarociński & Peter Karadi, 2020. "Deconstructing Monetary Policy Surprises—The Role of Information Shocks," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(2), pages 1-43, April.
    2. Borgen, Nicolai T. & Haupt, Andreas & Wiborg, Øyvind N., 2021. "A New Framework for Estimation of Unconditional Quantile Treatment Effects: The Residualized Quantile Regression (RQR) Model," SocArXiv 42gcb_v1, Center for Open Science.
    3. Bobasu, Alina & Repele, Amalia, 2025. "Effects of monetary policy on labour income: the role of the employer," Research Bulletin, European Central Bank, vol. 129.
    4. Di Maggio, Marco & Kermani, Amir & Ramcharan, Rodney & Yao, Vincent & Yu, Edison, 2022. "The pass-through of uncertainty shocks to households," Journal of Financial Economics, Elsevier, vol. 145(1), pages 85-104.
    5. Borgen, Nicolai T. & Haupt, Andreas & Wiborg, Øyvind N., 2021. "A New Framework for Estimation of Unconditional Quantile Treatment Effects: The Residualized Quantile Regression (RQR) Model," SocArXiv 42gcb, Center for Open Science.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    employment; labour market; monetary policy; workers type;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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