IMF Working Papers

Monetary Shocks and Labor Markets: Evidence from Online Job Vacancy Postings

By Serhan Cevik, Alice Fan, Sadhna Naik

March 28, 2025

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Format: Chicago

Serhan Cevik, Alice Fan, and Sadhna Naik. "Monetary Shocks and Labor Markets: Evidence from Online Job Vacancy Postings", IMF Working Papers 2025, 058 (2025), accessed April 6, 2025, https://doi.org/10.5089/9798229004251.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Central banks conduct monetary policy to achieve price stability, but decisions also have effects on labor-market outcomes. In this paper, we identify exogenous monetary shocks with the ‘interest rate surprise’ approach based on high-frequency changes in forward-looking interest rates and use daily data on online job vacancy postings to investigate the impact of monetary policy on labor markets in three European countries (Estonia, Latvia and Lithuania) during the period 2018–2024. Our results indicate that monetary policy exerts significant and durable effects on labor-market conditions as measured by online job vacancy postings in our sample of countries. First, a contractionary (expansionary) monetary policy shock leads to a persistent decline (increase) in online job vacancy postings. Across all countries, the average effect amounts to about 2 percent in 15 days after a contractionary monetary policy shock (i.e., an unanticipated increase of 1 percentage point in short-term interest rates). Second, there is significant heterogeneity in the magnitude and persistence of how monetary policy affects the labor market across three countries in our sample, varying from 0.5 percent in Latvia to 2 percent in Estonia and 3.2 percent in Lithuania. Taken together, these results are both of direct concern for policymakers and important for the transmission of monetary policy.

Subject: Central bank policy rate, COVID-19, Financial services, Health, Inflation, Labor, Labor market policy, Labor markets, Monetary policy, Monetary stance, Monetary tightening, Prices, Short term interest rates, Standing facilities, Zero lower bound

Keywords: Baltics, Central America, Central bank policy rate, COVID-19, Deposit rates, Estonia, Europe, Europe, Eurostat, Global, Inflation, Labor market flexibility, Labor market policy, Labor markets, Labor markets, Latvia, Lithuania, Local projections, Monetary policy, Monetary stance, Monetary tightening, Online job vacancy postings, Short term interest rates, Standing facilities, Zero lower bound

Publication Details

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