{"id":448619,"date":"2026-06-01T15:38:08","date_gmt":"2026-06-01T13:38:08","guid":{"rendered":"https:\/\/www.wifo.ac.at\/publication\/448619\/"},"modified":"2026-06-01T15:38:08","modified_gmt":"2026-06-01T13:38:08","slug":"the-link-between-monetary-policy-and-the-labor-share-new-empirical-evidence-and-theoretical-considerations","status":"publish","type":"publication","link":"https:\/\/www.wifo.ac.at\/en\/publication\/448619\/","title":{"rendered":"The Link Between Monetary Policy and the Labor Share \u2013 New Empirical Evidence and Theoretical Considerations"},"content":{"rendered":"","protected":false},"featured_media":0,"template":"","class_list":["post-448619","publication","type-publication","status-publish","hentry"],"acf":{"subtitle":"","text":"Using a structural VAR with a relatively agnostic identification based on narrative sign restrictions, this paper, in line with recent empirical evidence, documents an increase in the labor share following restrictive monetary policy in the euro area. We then complement the empirical analysis with a theoretical investigation that provides mechanisms linking monetary policy and the labor share \u2013 a connection that has so far been regarded as lacking an explanation. Specifically, we show that the observed responses of the labor share, real wages, and productivity to a monetary policy shock can be reconciled within an otherwise standard New Keynesian framework once capital accumulation is introduced and both nominal and real frictions \u2013 in particular, labor adjustment costs \u2013 are incorporated.","onlinedate":"2026-06-01 13:38:09","lang":"English","publication_series":"","publication_date":"20260601","publication_date_year":"","publication_date_full":false,"publication_num_pages":"74","keywords":"[\"Monetary policy\",\"Labor share\",\"Euro area\",\"Structural VAR\",\"New-Keynesian model\",\"Labor market frictions\"]","jelcodes":"[\"C32\",\"E25\",\"E52\"]","related_publications":"[]","pdf":448622,"zip":null,"link":"","monthly_report":true,"monthly_report_main":false,"monthly_report_volume":"","monthly_report_pages":"","monthly_report_pages_sort":"0","issue":"729","journal":"WIFO Working Papers","publisher":"","invisible":false,"external":false,"embargo_date":null,"types":[44410],"research_groups":[3500],"collaboration":"","persons":[4967,3543,3865],"persons_data":"[{\"personId\":4967,\"personName\":\"Harald Badinger\",\"organisationNames\":[]},{\"personId\":3543,\"personName\":\"Christian Glocker\",\"organisationNames\":[]},{\"personId\":3865,\"personName\":\"Stefan Schiman-Vukan\",\"organisationNames\":[]}]","clients":[10660],"subclients":[],"partners":[],"topics":[],"host_publication_title":"","host_publication_subtitle":"","place_of_publication":"","host_publication_editors":"[]","type_description":"","output_media":"","chapter":"","article_number":"","citations":"{\"apa\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_apa rendering_contributiontoperiodical rendering_apa rendering_contributiontoperiodical_apa\\\"><span>Badinger, H.<\\\/span><span>, Glocker, C.<\\\/span><span>, &amp; Schiman-Vukan, S.<\\\/span> (2026). <span>The Link Between Monetary Policy and the Labor Share \u2013 New Empirical Evidence and Theoretical Considerations<\\\/span>. <span><em>WIFO Working Papers<\\\/em><\\\/span>, (729).<\\\/div>\",\"vancouver\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_vancouver rendering_contributiontoperiodical rendering_vancouver rendering_contributiontoperiodical_vancouver\\\"><span>Badinger H<\\\/span><span>, Glocker C<\\\/span><span>, Schiman-Vukan S<\\\/span>. <span class=\\\"title\\\"><span>The Link Between Monetary Policy and the Labor Share \u2013 New Empirical Evidence and Theoretical Considerations<\\\/span><\\\/span>. <span>WIFO Working Papers<\\\/span>. 2026 Jun;(729).<\\\/div>\",\"bibtex\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_bibtex rendering_contributiontoperiodical rendering_bibtex rendering_contributiontoperiodical_bibtex\\\"><div>@misc{8b62e6feff494560b8c31ccbc51e1500,<\\\/div><div>  title    = \\\"The Link Between Monetary Policy and the Labor Share \u2013 New Empirical Evidence and Theoretical Considerations\\\",<\\\/div><div>  abstract = \\\"Using a structural VAR with a relatively agnostic identification based on narrative sign restrictions, this paper, in line with recent empirical evidence, documents an increase in the labor share following restrictive monetary policy in the euro area. We then complement the empirical analysis with a theoretical investigation that provides mechanisms linking monetary policy and the labor share \u2013 a connection that has so far been regarded as lacking an explanation. Specifically, we show that the observed responses of the labor share, real wages, and productivity to a monetary policy shock can be reconciled within an otherwise standard New Keynesian framework once capital accumulation is introduced and both nominal and real frictions \u2013 in particular, labor adjustment costs \u2013 are incorporated.\\\",<\\\/div><div>  keywords = \\\"Monetary policy, Labor share, Euro area, Structural VAR, New-Keynesian model, Labor market frictions\\\",<\\\/div><div>  author   = \\\"Harald Badinger and Christian Glocker and Stefan Schiman-Vukan\\\",<\\\/div><div>  year     = \\\"2026\\\",<\\\/div><div>  month    = jun,<\\\/div><div>  language = \\\"English\\\",<\\\/div><div>  journal  = \\\"WIFO Working Papers\\\",<\\\/div><p>}<\\\/p><\\\/div>\",\"ris\":\"<div class=\\\"rendering rendering_researchoutput  rendering_researchoutput_ris rendering_contributiontoperiodical rendering_ris rendering_contributiontoperiodical_ris\\\"><p>TY  - GEN<\\\/p><p>T1  - The Link Between Monetary Policy and the Labor Share \u2013 New Empirical Evidence and Theoretical Considerations<\\\/p><p>AU  - Badinger, Harald<\\\/p><p>AU  - Glocker, Christian<\\\/p><p>AU  - Schiman-Vukan, Stefan<\\\/p><p>PY  - 2026\\\/6<\\\/p><p>Y1  - 2026\\\/6<\\\/p><p>N2  - Using a structural VAR with a relatively agnostic identification based on narrative sign restrictions, this paper, in line with recent empirical evidence, documents an increase in the labor share following restrictive monetary policy in the euro area. We then complement the empirical analysis with a theoretical investigation that provides mechanisms linking monetary policy and the labor share \u2013 a connection that has so far been regarded as lacking an explanation. Specifically, we show that the observed responses of the labor share, real wages, and productivity to a monetary policy shock can be reconciled within an otherwise standard New Keynesian framework once capital accumulation is introduced and both nominal and real frictions \u2013 in particular, labor adjustment costs \u2013 are incorporated.<\\\/p><p>AB  - Using a structural VAR with a relatively agnostic identification based on narrative sign restrictions, this paper, in line with recent empirical evidence, documents an increase in the labor share following restrictive monetary policy in the euro area. We then complement the empirical analysis with a theoretical investigation that provides mechanisms linking monetary policy and the labor share \u2013 a connection that has so far been regarded as lacking an explanation. Specifically, we show that the observed responses of the labor share, real wages, and productivity to a monetary policy shock can be reconciled within an otherwise standard New Keynesian framework once capital accumulation is introduced and both nominal and real frictions \u2013 in particular, labor adjustment costs \u2013 are incorporated.<\\\/p><p>KW  - Monetary policy<\\\/p><p>KW  - Labor share<\\\/p><p>KW  - Euro area<\\\/p><p>KW  - Structural VAR<\\\/p><p>KW  - New-Keynesian model<\\\/p><p>KW  - Labor market frictions<\\\/p><p>M3  - WIFO series<\\\/p><p>JO  - WIFO Working Papers<\\\/p><p>JF  - WIFO Working Papers<\\\/p><p>ER  - <\\\/p><\\\/div>\"}","scientific_assistance":"[\"Czaloun Astrid\"]","scientific_review":"[]","version":"","release_date":null,"expiration_date":null,"surveyor":"","research_assistance":"","edv":"","additional_info_de":"","additional_info_en":""},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>The Link Between Monetary Policy and the Labor Share \u2013 New Empirical Evidence and Theoretical Considerations - 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