Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215006 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 8004
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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.
Subjects: 
macroeconomic shocks
monetary policy
business cycles
labour market
unemployment
racial inequality
FAVAR
sign restrictions
JEL: 
C32
E24
E32
E52
J10
J15
Document Type: 
Working Paper
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