Monetary Policy, Distribution and Autonomous Demand in the US

Maria Cristina Barbieri Goes () and Joana David Avritzer ()
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Maria Cristina Barbieri Goes: University of Bari Aldo Moro, Italy
Joana David Avritzer: Economics Department, Connecticut College, USA

No 2307, Working Papers from New School for Social Research, Department of Economics

Abstract: In this paper we explore the empirical implications of considering monetary and distribution shocks on semi-autonomous demand under a supermultiplier framework. In particular, we investigate the effect of changes in financial variables - the federal funds rate - and distributive variables - the wage share of income - on autonomous expenditure (e.g.: private residential investment and consumer credit), as well as economic growth. We use quarterly data for the United States economy from 1968 to 2022 and apply a SVAR model. We find that: (i) the federal funds rate, our financial variable, has a negative and statistically significant effect on autonomous expenditure, whether we define it to be given by residential investment added to consumer credit or to durable goods consumption; (ii) a positive shock in the wage share does seem to have a positive and significant effect on consumption and output, however, this effect is measured to be transitory; (iii) a positive shock in aggregated autonomous demand has a positive, persistent, and statistically significant effect on induced consumption and, output, as well as on the adjusted wage share; (iv) a positive shock in private residential investment has a positive, persistent and statistically significant effect on other autonomous components of demand and output; (v) while residential investment positively influences consumer credit, the inverse does not hold.

Keywords: Supermultiplier; financial and distributional shocks; SVAR; US; semi-autonomous expenditure (search for similar items in EconPapers)
JEL-codes: C32 D33 E11 E12 E31 E52 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2023-06
New Economics Papers: this item is included in nep-cba, nep-inv and nep-mon
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