Zooming in on Monetary Policy - The Labor Share and Production Dynamics of Two Million Firms

Conditional on a contractionary monetary policy shock, the labor share of value added is expected to decrease in basic New Keynesian model. By providing firm-level evidence, we are first validate this proposition. Using local projections and high dimensional fixed effects, show that one standard deviation shock decreases firms' by 0.4 percent, average. However, reactions heterogeneous along two dimensions: The most informative discriminate firms their response payroll expenses, leverage added. We inform debate transmission redistribution effects policy.