The Timing of Monetary Policy Shocks

Giovanni Olivei and Silvana Tenreyro

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: A vast empirical literature has documented delayed and persistent effects of monetary policy shocks on output. We show that this finding results from the aggregation of output impulse responses that differ sharply depending on the timing of the shock: when the monetary policy shock takes place in the first two quarters of the year, the response of output is quick, sizable, and dies out at a relatively fast pace. In contrast, output responds very little when the shock takes place in the third or fourth quarter. We propose a potential explanation for the differential responses based on uneven staggering of wage contracts across quarters. Using a stylized dynamic general equilibrium model, we show that a very modest amount of uneven staggering can generate differences in output responses similar to those found in the data.

Keywords: monetary policy; wage contracts (search for similar items in EconPapers)
JEL-codes: E1 E31 E32 E52 E58 (search for similar items in EconPapers)
Date: 2006-05
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cep.lse.ac.uk/pubs/download/dp0725.pdf (application/pdf)

Related works:
Journal Article: The Timing of Monetary Policy Shocks (2007)
Working Paper: The Timing of Monetary Policy Shocks (2006)
Working Paper: The timing of monetary policy shocks (2006)
Working Paper: The timing of monetary policy shocks (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0725

Access Statistics for this paper

More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Bibliographic data for series maintained by ().