Year-end Sale % OFF 
Abstract
The textbook New Keynesian (NK) model implies that the labor share is procyclical conditional on a monetary policy shock. We present evidence that a monetary policy tightening robustly increased the labor share and decreased real wages during the Great Moderation period in the US, the euro area, the UK, Australia and Canada. We show that this is inconsistent not only with the basic NK model, but with medium-scale NK models commonly used for monetary policy analysis and where it is possible to break the direct link between the labor share and the inverse mark-up. Our results imply that either NK models are unable to separate the dynamics of the labor share from the markup, or that markups do not respond in the way NK models predict.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
