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The Missing Link: Monetary Policy and The Labor Share

Cantore, Cristiano and Ferroni, Filippo and Leon-Ledesma, Miguel A. (2019) The Missing Link: Monetary Policy and The Labor Share. Working paper. CEPR Centre for Economic Policy Research (KAR id:77307)


The textbook New-Keynesian (NK) model implies that the labor share is pro-cyclical conditional on a monetary policy shock. We present evidence that a monetary policy tightening robustly increased the labor share and decreased real wages and labor productivity 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 a wide variety of NK models commonly used for monetary policy analysis and where the direct link between the labor share and the markup can be broken.

Item Type: Reports and Papers (Working paper)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Miguel Leon-Ledesma
Date Deposited: 10 Oct 2019 14:57 UTC
Last Modified: 09 Dec 2022 20:38 UTC
Resource URI: (The current URI for this page, for reference purposes)

University of Kent Author Information

Leon-Ledesma, Miguel A..

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