Unemployment in the euro area and unconventional monetary policy surprises

Abstract

We examine the impact of the European Central Bank’s monetary policy on the euro area labor markets over the period 2010–2018. Using Jordà (2005) local projection method, we find that unemployment rates decline in response to expansionary monetary policy surprises that can be related to unconventional policy measures. At the same time, hours worked rise. In peripheral countries, the decrease in unemployment rates is relatively pronounced, while in core countries it is only minor. This result can be attributed to the effect of unconventional monetary policy, which was stronger in the periphery, and to the implementation of labor market liberalization reforms.