Isabel Cairó | Macro Paper Warehouse

Labor Market Discrimination and the Racial Unemployment Gap: Can Monetary Policy Make a Difference?

Thu, 01 Jan 2026 00:00:00 +0000

This paper addresses two connected questions: why do Black workers face persistently higher and more volatile unemployment than white workers, and can the Federal Reserve’s August 2020 shift from a symmetric “Deviations” rule to a “Shortfalls” rule narrow the resulting racial unemployment gap? The authors build a New Keynesian search and matching model with endogenous separations (Mortensen-Pissarides) and add employer taste-based discrimination, calibrated to U.S. Current Population Survey microdata from January 1976 to December 2019.

Evaluating macroeconomic outcomes under asymmetries: Expectations matter

Research Question

This paper investigates whether and how assumptions about household and firm expectations alter the macroeconomic implications of asymmetries commonly embedded in macroeconomic models. Specifically, it asks: when a model features a nonlinearity — such as an asymmetric monetary policy rule or a nonlinear Phillips curve — do the longer-run average outcomes and the distributional properties of inflation and unemployment depend on whether agents have rational expectations (RE, accounting for the possibility of future shocks) versus perfect foresight (PF, not anticipating future shocks)?