Location, Location, Inflation : Exploring Heterogeneous Unemployment Responses to Monetary Policy Shocks Across Swedish Municipalities

Sammanfattning

This paper examines the causes of heterogeneous unemployment responses to monetary policy shocks across Swedish municipalities. A two-stage regression model combining local projection with principal component analysis is applied to a set of municipal-level panel data spanning the period 1999 to 2018. The results confirm the role of established transmission channels, including wealth, asset prices, inequality, and credit, in shaping local unemployment outcomes in Sweden. Furthermore, the results also suggest the existence of less conventional transmission patterns, such as those related to religious values and public sector employment. The paper's findings highlight the importance of accounting for regional heterogeneity when evaluating monetary policy.