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Does Monetary Policy Help Least Those Who Need It Most?

Michael Hanson, Erik Hurst () and Ki Young Park ()

No 2006-006, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: We estimate the impact of U.S. monetary policy on the cross-sectional distribution of state economic activity for a 35-year panel. Our results indicate that the effects of policy have a significant history dependence, in that relatively slow growth regions contract more following contractionarymonetary shocks. Moreover, policy is asymmetric, in that expansionary shocks have less of a beneficial impact upon relatively slow growth areas. As a result, we conclude that monetary policy on average widens the dispersion of growth rates among U.S. states, and those locations initially at the low end of the cross-sectional distribution benefit least from any given change inmonetary policy.

Keywords: Monetary policy; asymmetric effects; state dependence; regional business cycles (search for similar items in EconPapers)
JEL-codes: E32 E59 R10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-geo, nep-mac and nep-mon
Date: 2006-01
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