 Monetary policy and production networks: an empirical investigationJournal of Monetary Economics, 2021, vol. 119, issue C, 21-39 Abstract: This paper offers novel econometric evidence on the contribution of production networks to the effect of monetary shocks on real macroeconomic variables. In particular, we construct a highly disaggregated monthly dataset on US final sectoral consumption to estimate that at least 30% of the effect of monetary shocks on aggregate consumption comes from amplification through input-output linkages, which facilitate downstream propagation of price rigidity. At the sectoral level, we find that the network effect rises in the frequency of price non-adjustment and intermediates intensity. Moreover, the network effect is highly concentrated: sectors that jointly account for 17% of our sample aggregate consumption account for 98% of the amplification. In order to develop our econometric specification, we obtain novel analytical sector-level solutions to a forward-looking New Keynesian model with asymmetric input-output linkages. Keywords: Production networks; Monetary policy shocks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:119:y:2021:i:c:p:21-39 DOI: 10.1016/j.jmoneco.2021.02.002 Access Statistics for this article Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser More articles in Journal of Monetary Economics from Elsevier |
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