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Microsoft® Word 2016
minimum wage, adjustment channels, firm survey
application/pdf
Katalin Bodnár, Ludmila Fadejeva, Stefania Iordache, Liina Malk, Desislava Paskaleva, Jurga Pesliakaitė, Nataša Todorović Jemec, Peter Tóth, Robert Wyszyński
We study the transmission channels for rises in the minimum wage using a unique firm-level dataset from eight Central and Eastern European countries. Representative samples of firms in each country were asked to evaluate the relevance of a wide range of adjustment channels following specific instances of rises in the minimum wage during the recent post-crisis period. The paper adds to the rest of literature by presenting the reactions of firms as a combination of strategies, and evaluates the relative importance of those strategies. Our findings suggest that the most popular adjustment channels are cuts in non-labour costs, rises in product prices, and improvements in productivity. Cuts in employment are less popular and occurs mostly through reduced hiring rather than direct layoffs. Our study also provides evidence of potential spillover effects that rises in the minimum wage can have on firms without minimum wage workers.
How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe
minimum wage
adjustment channels
firm survey
Microsoft® Word 2016
2016-07-04T16:33:36+02:00
2018-01-05T15:09:27+01:00
2018-01-08T14:07:06+01:00
uuid:4534217A-A3CF-47DB-832F-B682D9AE58F4
uuid:df7ced85-7488-49ca-848b-3d22df5562bd
Print
10.2866/032319
QB-AR-18-002-EN-N
978-92-899-3227-1
1725-2806
No 2122 / January 2018
D22, E23, J31
European Central Bank
www.ecb.europa.eu
Working Paper Series
We analyse the impact of standard and non-standard monetary policy measures on bank profitability. For empirical identification, the analysis focuses on the euro area, thereby exploiting substantial bank and country heterogeneity within a monetary union where the central bank has implemented a broad range of unconventional policies, including quantitative easing and negative interest rates. We use both proprietary and commercial data on individual bank balance sheets and financial market prices. Our results show that monetary policy easing â•fi a decrease in short-term interest rates and/or a flattening of the yield curve â•fi is not associated with lower bank profits once we control for the endogeneity of the policy measures to expected macroeconomic and financial conditions. Importantly, our analysis indicates that the main components of bank profitability are asymmetrically affected by accommodative monetary conditions, with a positive impact on loan loss provisions and non-interest income largely offsetting the negative one on net interest income. We also find that a protracted period of low interest rates might have a negative effect on profits that, however, only materialises after a long period of time and tends to be counterbalanced by improved macroeconomic conditions. In addition, while more operationally efficient banks benefit more from monetary policy easing, banks engaging more extensively in maturity transformation experience a higher increase in profitability after a steepening of the yield curve. Finally, we assess the impact of unconventional monetary policies on market-based measures of expected bank profitability and credit risk, by employing an event study analysis using high frequency data, and find that accommodative monetary policies tend to increase bank stock returns and reduce credit risk.
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