Monetary policy and the cost of wage rigidity : evidence from the stock market

  • Using a unique confidential contract level dataset merged with firm-level asset price data, we find robust evidence that firms' stock market valuations and employment levels respond more to monetary policy announcements the higher the degree of wage rigidity. Data on the renegotiations of collective bargaining agreements allow us to construct an exogenous measure of wage rigidity. We also find that the amplification induced by wage rigidity is stronger for firms with high labor intensity and low profitability, providing evidence of distributional consequences of monetary policy. We rationalize the evidence through a model in which firms in different sectors feature different degrees of wage rigidity due to staggered renegotiations vis-a-vis unions.

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Author:Ester FaiaGND, Vincenzo Pezone
URN:urn:nbn:de:hebis:30:3-487651
URL:https://ssrn.com/abstract=3326397
Parent Title (English):SAFE working paper series ; No. 242
Series (Serial Number):SAFE working paper series (242)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2019
Year of first Publication:2019
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2019/02/05
Tag:distributional consequences of monetary policy; employer-employee level dataset; heterogeneous monetary policy response; heterogeneous wage rigidity; monetary policy surprise shocks
Issue:January 2018
Page Number:51
HeBIS-PPN:44506000X
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht