The Long-Run Effects of Monetary Policy

Oscar Jorda, Sanjay Singh and Alan Taylor

No 2020-01, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Is the effect of monetary policy on the productive capacity of the economy long lived? Yes, in fact we find such impacts are significant and last for over a decade based on: (1) merged data from two new international historical databases; (2) identification of exogenous monetary policy using the macroeconomic trilemma; and (3) improved econometric methods. Notably, the capital stock and total factor productivity (TFP) exhibit hysteresis, but labor does not. Money is non-neutral for a much longer period of time than is customarily assumed. A New Keynesian model with endogenous TFP growth can reconcile all these empirical observations.

Keywords: monetary policy; money neutrality; hysteresis; trilemma; instrumental variables; local projections (search for similar items in EconPapers)
JEL-codes: E01 E30 E32 E44 E47 E51 F33 F42 F44 (search for similar items in EconPapers)
Pages: 72
Date: 2020-01-16
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
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Citations: View citations in EconPapers (58)

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Related works:
Working Paper: The long-run effects of monetary policy (2020)
Working Paper: The Long-Run Effects of Monetary Policy (2020)
Working Paper: The Long-Run Effects of Monetary Policy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:87376

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DOI: 10.24148/wp2020-01

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