Do Firms Adjust Their Employment Plans in Response to Monetary Policy Announcements? Evidence from German Survey Data

Abstract

"Recent studies exploit the response date in survey data to identify the causal effects of monetary policy announcements on individuals and firms. While the identification scheme is credible, so far, the effects could have been estimated only on a limited set of outcome variables. This study extends the evidence on the causal relations of monetary policy announcements and firms adjustments by estimating the effect on firms employment plans measured by employment expectations. I observe economically significant effects of monetary policy announcements on one-year-ahead employment expectations. Moreover, using the comprehensive nature of the data, I show that firms employment expectations are strong predictors of actual employment changes. This makes expectations not vague sentiments but concrete plans for future employment adjustments. I therefore conclude that firms indeed report their adjusted employment plans after a monetary policy announcement. These findings suggest that firms not only pay attention to such announcements but also attribute to unexpected monetary policy shocks serious economic impacts such that firms plan to adjust their employment levels despite potentially high labor adjustment costs. Thus, firms perceive monetary policy shocks as having lasting effects on the economy." (Author's abstract, IAB-Doku) ((en))

Cite article

Kovalenko, T. (2026): Do Firms Adjust Their Employment Plans in Response to Monetary Policy Announcements? Evidence from German Survey Data. (LASER discussion papers 157), Erlangen, 60 p.