• syys 25
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  torstai 25.9.2025, 10.30

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Research Seminar - Aarti Singh (University of Sydney) - Heterogeneity in labor market response to monetary policy: small versus large firms

Co-authors: Jacek Suda (National Bank of Poland) and Anastasia Zervou (University of Texas at Austin)

Abstract:
This paper studies how monetary policy affects employment and hiring growth across firms of different sizes and how these effects vary with the direction of the policy shock. Using high-frequency monetary policy surprises and disaggregated data from the U.S. Quarterly Workforce Indicators (QWI), we estimate impulse responses for small and large firms separately. We find that monetary contractions reduce employment and hiring growth more in large firms, while expansions stimulate that of small firms more. These effects are stronger for hiring flows than for employment levels and unfold asymmetrically over time; contractionary effects are immediate, while expansionary responses are more delayed. As an implication of the increasingly employment concentration in large firms, the aggregate labor market response to monetary policy has shifted: contractionary policy has become more effective at reducing employment and hiring growth, while expansionary policy has become less effective at boosting it. These results highlight the importance of accounting for firm size, the direction of monetary policy shocks, employment flows as well as employment concentration, when evaluating the transmission of monetary policy to the labor market.

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