Macroeconomic Shocks and Racial Labour Market Differences in the U.S.

47 Pages Posted: 12 Jan 2020

See all articles by Kuhelika De

Kuhelika De

Grand Valley State University - Department of Economics

Ryan A. Compton

University of Manitoba

Daniel Giedeman

Grand Valley State University - Department of Economics

Gary A. Hoover

University of Oklahoma

Date Written: 2019

Abstract

Using 136 United States macroeconomic indicators from 1973 to 2017, and a factor augmented vector autoregression (FAVAR) framework with sign restrictions, we investigate the effects of three structural macroeconomic shocks - monetary, demand, and supply - on the labour market outcomes of black and white Americans. Our results indicate that adverse macroeconomic shocks have differential effects on labour market outcomes for blacks and whites, hurting blacks disproportionately relative to whites. Black Americans appear to be significantly more sensitive to macroeconomic shocks than white Americans. Evidence from our FAVAR model, which uses information on contractionary initiatives by the Federal Reserve, indicates that the employment-population ratio among black Americans falls close to twice as much as that among white Americans, primarily due to an increase in their unemployment rate and not a decline in labour force participation rate. Policymakers should take account of these heterogeneous effects across racial groups when implementing disinflationary guiding policy.

Keywords: macroeconomic shocks, monetary policy, business cycles, labour market, unemployment, racial inequality, FAVAR, sign restrictions

JEL Classification: C320, E240, E320, E520, J100, J150

Suggested Citation

De, Kuhelika and Compton, Ryan A. and Giedeman, Daniel and Hoover, Gary A., Macroeconomic Shocks and Racial Labour Market Differences in the U.S. (2019). CESifo Working Paper No. 8004, Available at SSRN: https://ssrn.com/abstract=3517051

Kuhelika De (Contact Author)

Grand Valley State University - Department of Economics ( email )

3072 L. William Seidman Center
50 Front Avenue SW
Grand Rapids, MI 49504
United States
616-331-7460 (Phone)

Ryan A. Compton

University of Manitoba ( email )

501 F.A. Bldg
Winnipeg R3T 5V4, Manitoba R3T 5V5
Canada

Daniel Giedeman

Grand Valley State University - Department of Economics ( email )

478c DeVos Center
Grand Rapids, MI 49504
United States

Gary A. Hoover

University of Oklahoma ( email )

308 Cate Center Drive
Room 170
Norman, OK 73072-2103
United States

HOME PAGE: http://https://sites.google.com/site/garyhoovereconomics/economics-622

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