The Differential Impact of Monetary Policy on Blacks and Whites since the Great Recession

Abstract

This paper studies the differential impact of monetary policy on labor market responses for blacks and whites since the start of the Great Recession. We estimate and quantify these differences using a somewhat unconventional approach to identifying an expansionary monetary policy shock. At the long horizon, we find that black employment is more sensitive to changes in monetary policy than that of whites. However, at the short horizon, black employment falls, whereas white employment immediately increases. Owing to such disparities, one might expect the central bank to be deeply engaged in understanding the causal mechanisms at play. Moreover, our findings raise concern that recent monetary policy tightening may adversely affect blacks disproportionately to whites.