Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-24T00:36:57.189Z Has data issue: false hasContentIssue false
  • English
  • Français

TRANSMISSION OF MONETARY POLICY SHOCKS: DO INPUT–OUTPUT INTERACTIONS MATTER?

Published online by Cambridge University Press:  21 March 2019

Aarti Singh  and
Stefano Tornielli Di Crestvolant
Aarti Singh*
Affiliation:
University of Sydney
Stefano Tornielli Di Crestvolant
Affiliation:
University of Sydney
*
Address correspondence to: Aarti Singh, Level 5, Social Sciences Building, A02, The University of Sydney, NSW 2006, Australia. e-mail: [email protected]. Phone: +61 (0) 2 9351 3324. Fax: +61 (0) 2 9351 4341.
Get access Rights & Permissions [Opens in a new window]

Abstract

We examine whether input–output interactions among industries impact the transmission of monetary policy shocks through the economy. Using vector autoregressive (VAR) methods we find evidence of heterogeneity in the output response to a monetary policy shock in both finished goods industries and intermediate goods industries. While output responses in finished goods industries can be related to heterogeneity in industry characteristics, this relationship is not so obvious for intermediate goods industries. For the intermediate goods industries in our sample, we find new evidence of demand-spillover effects that impact the transmission of monetary policy via input–output linkages.

Keywords

Monetary Policy TransmissionInput–OutputVARIntermediate Goods
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 8 , December 2020 , pp. 1881 - 1903
Copyright
© 2019 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Acemoglu, D., Akcigit, U. and Kerr, W. (2015) Networks and the macroeconomy: An empirical exploration. NBER Macroeconomics Annual 30, 273–335.CrossRefGoogle Scholar
Barth, M. J. and Ramey, V. A. (2001) The cost channel of monetary transmission. NBER Macroeconomics Annual 16, 199–256.CrossRefGoogle Scholar
Basu, S. (1995) Intermediate goods and business cycles: implications for productivity and welfare. American Economic Review 85, 512–531.Google Scholar
Blanchard, O. J. (1983) “Price asynchronization and price level inertia,” in Dornbusch, R. and Simonsen, M. H., eds., Infiation, Debt, and Indexation. Cambridge, MA: MIT Press.Google Scholar
Bouakez, H., Cardia, E. and Ruge-Murcia, F. J. (2009) The transmission of monetary policy in a multisector economy. International Economic Review 50, 1243–1266.CrossRefGoogle Scholar
Bouakez, H., Cardia, E. and Ruge-Murcia, F. J. (2011) Durable goods, inter-sectoral linkages and monetary policy. Journal of Economic Dynamics and Control 35(5), 730–745.CrossRefGoogle Scholar
Bouakez, H., Cardia, E. and Ruge-Murcia, F. J. (2014) Sectoral price rigidity and aggregate dynamics. Europoean Economic Review 65, 1–22.CrossRefGoogle Scholar
Carvalho, C. and Lee, J. W. (2011) Sectoral price facts in a sticky-price model. FRB of New York Staff Report, No. 495.Google Scholar
Christiano, L. J., Eichenbaum, M. and Evans, C. (1996) The effects of monetary policy shocks: evidence from the flow of funds. The Review of Economics and Statistics 78, 16–34.CrossRefGoogle Scholar
Clark, T. E. (1999) The responses of prices at different stages of production to monetary policy shocks. The Review of Economics and Statistics 81, 420–433.CrossRefGoogle Scholar
Davis, S. and Haltiwanger, J. (2001) Sectoral job creation and destruction responses to oil price changes. Journal of Monetary Economics 48, 465–512.CrossRefGoogle Scholar
Dedola, L. and Lippi, F. (2005) The monetary transmission mechanism: Evidence from the industries of five OECD countries. European Economic Review 49, 1543–1569.CrossRefGoogle Scholar
Erceg, C. and Levin, A. (2006) Optimal monetary policy with durable consumption goods. Journal of Monetary Economics 53, 1341–1359.CrossRefGoogle Scholar
Ganley, J. and Salmon, C. (1997) The industrial impact of monetary policy shocks: some stylised facts. Bank of England Working Paper Series, No. 68.Google Scholar
Gertler, M. and Gilchrist, S. (1994) Monetary policy, business cycles, and the behavior of small manufacturing firms. The Quarterly Journal of Economics 109, 309–340.CrossRefGoogle Scholar
Giordani, P. (2004) An alternative explanation of the price puzzle. Journal of Monetary Economics 51, 1271–1296.CrossRefGoogle Scholar
Huang, K. X. and Liu, Z. (2001) Production chains and general equilibrium aggregate dynamics. Journal of Monetary Economics 48, 437–462.CrossRefGoogle Scholar
Huang, K. X. and Liu, Z. (2005) Inflation targeting: What inflation rate to target? Journal of Monetary Economics 52, 1435–1462.CrossRefGoogle Scholar
Kim, C. J. and Nelson, C. R. (1999) Has the US economy become more stable? A Bayesian approach based on a Markov-switching model of the business cycle. The Review of Economics and Statistics 81, 608–616.CrossRefGoogle Scholar
McConnell, M. M. and Perez-Quiros, G. (1998) Output fluctuations in the United States: What has changed since the early 1980s? FRB of New York Staff Report, 41.CrossRefGoogle Scholar
Mishkin, F. S. (1996) The channels of monetary transmission: lessons for monetary policy. Banque De France Digest 27, 33–44.Google Scholar
Petrella, I. and Santoro, E. (2011) Input–output interactions and optimal monetary policy. Journal of Economic Dynamics and Control 35, 1817–1830.CrossRefGoogle Scholar
Shea, J. (1993) Do supply curves slope up? The Quarterly Journal of Economics 108, 1–32.CrossRefGoogle Scholar
Strum, B. E. (2009) Monetary policy in a forward-looking input–output economy. Journal of Money, Credit and Banking 41, 619–650.CrossRefGoogle Scholar
von Hayek, F. A. (1931) Prices and Production. London: George Routledge and Sons.Google Scholar
Supplementary material: PDF

Singh and Di Crestvolant supplementary material

Online Appendix

Download Singh and Di Crestvolant supplementary material(PDF)
PDF 165.5 KB