The Asymmetric Effects of Monetary Policy on Job Creation and Destruction

April 1, 1997

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents theory and evidence on the asymmetric effects of monetary policy on job creation and job destruction. First, it solves a dynamic matching model and it shows how interest rate changes result in an asymmetric response of job creation and destruction. Second, it looks at how changes in the federal fund rate affect gross job flows in the U.S. manufacturing industry, and it finds evidence of asymmetry. Tight policy increases job destruction and reduces net employment changes. Conversely, easy policy appears ineffective in stimulating job creation.

Subject: Employment, Job creation, Job destruction, Labor, Production, Productivity, Unemployment

Keywords: Employment, equilibrium unemployment, Europe, firm behavior, inflation rate, Job Creation, job creation condition, Job Destruction, job flow, monetary policy, money supply, net employment change, policy switch, Productivity, reservation productivity, Search Models, Transmission of Monetary Policy, Unemployment, WP

Pages:
30
Volume:
1997
DOI:
https://doi.org/10.5089/9781451967555.001
Issue:
057
Series:
Working Paper No. 1997/057
Stock No:
WPIEA0571997
ISBN:
9781451967555
ISSN:
1018-5941

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Notes

Also published in Staff Papers, Vol. 44, No. 4, December 1997.

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