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<p>Central banks conduct monetary policy to achieve price stability, but decisions also have effects on labor-market outcomes. This paper investigates the short-run effects of monetary policy on labor demand in three small European economies—Estonia, Latvia, and Lithuania—using high-frequency identification and daily online job vacancy data over 2018–2024. Monetary shocks are measured as unanticipated changes in forward-looking interest rates around policy announcements. We find that contractionary (expansionary) monetary policy shocks induce immediate and persistent declines (increases) in job vacancy postings. On average, a 1 percentage point unanticipated rise in short-term interest rates reduces vacancies by roughly 2 percent within two weeks, with substantial heterogeneity across countries: the cumulative effect ranges from 0.5 percent in Latvia to 3.2 percent in Lithuania. These results highlight the speed and magnitude of labor demand responses to monetary policy and underscore the role of structural differences in shaping transmission. By combining daily vacancy data with high-frequency shocks, the paper provides novel evidence on the labor market channels of monetary policy, offering timely insights for policymakers evaluating the near-term employment consequences of interest rate decisions in small open economies.</p>

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Monetary shocks and labor markets: evidence from online job vacancy postings

  • 期刊论文

  • 发表日期：

    2026年6月1日

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  • Serhan Cevik,
  • Alice Fan,
  • Sadhna Naik

摘要

Central banks conduct monetary policy to achieve price stability, but decisions also have effects on labor-market outcomes. This paper investigates the short-run effects of monetary policy on labor demand in three small European economies—Estonia, Latvia, and Lithuania—using high-frequency identification and daily online job vacancy data over 2018–2024. Monetary shocks are measured as unanticipated changes in forward-looking interest rates around policy announcements. We find that contractionary (expansionary) monetary policy shocks induce immediate and persistent declines (increases) in job vacancy postings. On average, a 1 percentage point unanticipated rise in short-term interest rates reduces vacancies by roughly 2 percent within two weeks, with substantial heterogeneity across countries: the cumulative effect ranges from 0.5 percent in Latvia to 3.2 percent in Lithuania. These results highlight the speed and magnitude of labor demand responses to monetary policy and underscore the role of structural differences in shaping transmission. By combining daily vacancy data with high-frequency shocks, the paper provides novel evidence on the labor market channels of monetary policy, offering timely insights for policymakers evaluating the near-term employment consequences of interest rate decisions in small open economies.