The propagation of monetary policy shocks in a heterogeneous production economy

Ernesto Pasten, Raphael Schoenle and Michael Weber

Journal of Monetary Economics, 2020, vol. 116, issue C, 1-22

Abstract: 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.

Keywords: Input-output linkages; Multi-sector Calvo model; Monetary policy (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (43)

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Related works:
Working Paper: The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy (2020)
Working Paper: The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy (2019)
Working Paper: The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy (2018)
Working Paper: The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:116:y:2020:i:c:p:1-22

DOI: 10.1016/j.jmoneco.2019.10.001

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