The Geographic Effects of Monetary Policy

Juan Herreño and Mathieu Pedemonte

No 22-15, Working Papers from Federal Reserve Bank of Cleveland

Abstract: We study the differential regional effects of monetary policy exploiting geographical heterogeneity in income across cities in the United States. We find that prices and employment in poorer cities react more to monetary policy shocks. The results for prices hold for a wide range of narrow consumer expenditure categories. The results are consistent with New Keynesian models that allow for a differential share of hand-to-mouth consumers across regions, but not with models in which regions have different slopes of the Phillips curve. We show that an increase in heterogeneity across cities amplifies the effect of monetary policy on prices and employment.

Keywords: Heterogeneous Effects of Monetary Policy; Monetary Union; TANK (search for similar items in EconPapers)
JEL-codes: E24 E31 E52 E58 F45 (search for similar items in EconPapers)
Pages: 43
Date: 2022-05-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-geo, nep-mac, nep-mon and nep-ure
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwq:94203

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DOI: 10.26509/frbc-wp-202215

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