Employment Effects of Unconventional Monetary Policy: Evidence from QE

81 Pages Posted: 19 Jul 2017 Last revised: 16 Dec 2018

See all articles by Stephan Luck

Stephan Luck

Federal Reserve Bank of New York

Tom Zimmermann

University of Cologne; QuantCo, Inc.

Multiple version iconThere are 2 versions of this paper

Date Written: October 9, 2018


This paper investigates the effect of the Federal Reserve's unconventional monetary policy on employment via a bank lending channel. We find that banks with higher mortgage-backed securities holdings issued relatively more loans after the first and third rounds of quantitative easing (QE1 and QE3). While additional volume is concentrated in refinanced mortgages after QE1, increases are driven by newly originated home purchase mortgages and additional commercial and industrial lending after QE3. Using spatial variation, we show that regions with a high share of affected banks experienced stronger employment growth after both, QE1 and QE3. However, while the ability of households to refinance mortgages after QE1 spurred local demand, the resulting additional employment growth was relatively weak and confined to the non-tradable goods sector. In contrast, the increase in overall employment after QE3 is sizable and can be attributed to the supply of additional credit to firms. To support this finding, we use new confidential loan-level data to show that firms with stronger ties to affected banks increased employment and capital investment more after QE3. Altogether, our findings suggest that unconventional monetary policy can, similar to conventional monetary policy, affect real economic outcomes.

Keywords: monetary policy, employment, real effects, large scale asset purchases, quantitative easing

JEL Classification: E00, E02, E20, E65

Suggested Citation

Luck, Stephan and Zimmermann, Tom and Zimmermann, Tom, Employment Effects of Unconventional Monetary Policy: Evidence from QE (October 9, 2018). Available at SSRN: https://ssrn.com/abstract=3002047 or http://dx.doi.org/10.2139/ssrn.3002047

Stephan Luck (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Tom Zimmermann

QuantCo, Inc. ( email )

University of Cologne ( email )

Cologne, 50923

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