The Dynamic Effects of U.S. Monetary Policy on State Unemployment
18 Pages Posted: 25 Dec 2010
Date Written: December 17, 2010
This paper studies the transmission of monetary shocks to state unemployment rates, within a novel structural factor-augmented VAR framework with a time-varying propagation mechanism. We find evidence of large heterogeneity over time in the responses of state unemployment rates to monetary policy shocks, which do not necessarily comply with the response of the national unemployment rate. We also find evidence of heterogeneity over the spatial dimension, although geographical proximity seems to play an important role in the transmission of monetary shocks.
Keywords: regional unemployment, structural VAR, factor model, monetary policy
JEL Classification: R15, C11, E52
Suggested Citation: Suggested Citation