Does Unconventional Monetary Policy Boost Enterprise Employment? - Evidence from China's Medium-Term Lending Facility

Declining effectiveness of conventional monetary policy and an employment-first orientation necessitate monetary policy innovation. Taking China's medium-term lending facility (MLF) as a case, this study examines the employment effects of unconventional monetary policy. Results indicate that, through the bank credit channel, the MLF improves employment in private, small, micro, and agriculture-related enterprises, with more pronounced effects on high-skilled employment. Mechanism analysis further shows that these employment gains operate through output and factor complementarity effects. Finally, the positive employment impact of the MLF is stronger for firms with greater access to external financing and in regions with more intense bank competition.