The Impact of Monetary Policy on the Distribution and Type of Unemployment

Oct 29, 2004 | by
  • Description

This working paper by William M. Rodgers III employs two widely used approaches to estimate the effects of monetary policy on seven measures of unemployment. Evidence from recursive vector autoregressions and autoregressive distributed lag models that use information on the Federal Reserve's contractionary initiatives indicate that the weeks of unemployment distribution (e.g., less than five weeks) is significantly altered. The number of unemployed increases at all segments of the distribution. However, as a share of total unemployment, the increase is greatest among those with 15 weeks of unemployment or more. The number of job losers on both temporary and permanent layoff rise, with over two-thirds of the increase among permanent job losers. The number of reentrants into the labor force, new entrants, and part-time workers that become unemployed also rises. The share of the unemployed that are job losers rises, while the shares of reentrant, new entrant, and part-time workers that become unemployed falls.