The propagation of monetary policy shocks in a heterogeneous production economy
By E. Pastén, Raphael S. Schoenle, Michael Weber. Journal of Monetary Economics, 2018
153 citations recorded by the source corpus.
Realistic heterogeneity in price rigidity interacts with heterogeneity in sectoral size and input-output linkages in the transmission of monetary policy shocks. Quantitatively, heterogeneity in price stickiness is the central driver for real effects. Input-output linkages and consumption shares alter the identity of the most important sectors to the transmission. Reducing the number of sectors decreases monetary non-neutrality with a similar impact response of inflation. Hence, the initial response of inflation to monetary shocks is not sufficient to discriminate across models and ignoring heterogeneous consumption shares and input-output linkages identifies the wrong sectors from which the real effects originate.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/e6dfc6634de4dbc49da7b79d1608d416b88f2e55
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Citations in the corpus
- Monetary Policy Through Production Networks: Evidence from the Stock Market (2017, unknown): “In our case, monetary policy shocks hit sectors differently and a necessary condition to generate large aggregate effects is high dispersion in sectors’ multipliers mapping sectoral exposure to shocks onto aggregate fluctuations, as in Pasten et al. (2020). A dense network reduces this heterogeneity”
- Productivity and Misallocation in General Equilibrium* (2017, background): “In their important study, Pasten et al. (2016) characterize the response of output to shocks in a model with Calvo frictions and production networks.”