The output composition puzzle: a difference in the monetary transmission mechanism in the euro area and U.S

Ignazio Angeloni (ignazio.angeloni@eui.eu), Anil Kashyap, Benoit Mojon and Daniele Terlizzese

No 268, Working Paper Series from European Central Bank

Abstract: We revisit recent evidence on how monetary policy affects output and prices in the U.S. and in the euro area. The response patterns to a shift in monetary policy are similar in most respects, but differ noticeably as to the composition of output changes. In the euro area investment is the predominant driver of output changes, while in the U.S. consumption shifts are significantly more important. We dub this difference the output composition puzzle and explore its implications and several potential explanations for it. While the evidence seems to point at differences in consumption responses, rather than investment, as the proximate cause for this fact, the source of the consumption difference remains a puzzle. JEL Classification: E21, E22, E30, E52

Keywords: business cycles; consumption; investment; Monetary policy transmission (search for similar items in EconPapers)
Date: 2003-09
Note: 1792986
References: View complete reference list from CitEc
Citations: View citations in EconPapers (78)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp268.pdf (application/pdf)

Related works:
Working Paper: The Output Composition Puzzle: A Difference in the Monetary Transmission Mechanism in the Euro Area and U.S (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2003268

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications (officialpublications@ecb.int).