òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Monetary Policy and the Labor Market: A Quasi-experiment in Sweden
òòò½Íø Review
(pp. 3451–86)
Abstract
We analyze a monetary quasi-experiment in Sweden from 2010–2011, when the Riksbank raised the interest rate substantially. We argue that this increase was beyond what labor market conditions warranted, driven instead by new concerns about financial stability. Using a battery of specifications that rule out domestic or international confounders, we show that this monetary tightening led to a substantial economic contraction, raising unemployment by 1–2 percentage points. Using administrative microdata, we find that sectors with nominal wage rigidity drove much of the response and that the monetary contraction was more regressive than the typical business cycle.Citation
Coglianese, John, Maria Olsson, and Christina Patterson. 2025. "Monetary Policy and the Labor Market: A Quasi-experiment in Sweden." òòò½Íø Review 115 (10): 3451–86. DOI: 10.1257/aer.20231167Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- E58 Central Banks and Their Policies