Monetary Policy through Production Networks: Evidence from the Stock Market
Ali Ozdagli () and
Michael Weber ()
No 23424, NBER Working Papers from National Bureau of Economic Research, Inc
Monetary policy shocks have a large impact on stock returns in narrow windows around press releases by the Federal Reserve. We use spatial autoregressions to decompose the overall effect of monetary policy shocks into a direct effect and an indirect (network) effect. We attribute 50%-85% of the overall effect to indirect effects. The decomposition is a robust feature of the data and we confirm large indirect effects in realized cash-flow fundamentals. A simple model with intermediate inputs guides our empirical strategy. Our findings indicate that production networks might be an important propagation mechanism of monetary policy to the real economy.
JEL-codes: E12 E31 E44 E52 G12 G14 (search for similar items in EconPapers)
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Working Paper: Monetary Policy through Production Networks: Evidence from the Stock Market (2017)
Working Paper: Monetary policy through production networks: evidence from the stock market (2017)
Working Paper: Monetary Policy Through Production Networks: Evidence from the Stock Market (2016)
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