The Timing of Monetary Policy Shocks

59 Pages Posted: 17 Jun 2004

See all articles by Giovanni Olivei

Giovanni Olivei

Federal Reserve Bank of Boston

Silvana Tenreyro

London School of Economics (LSE)

Multiple version iconThere are 2 versions of this paper

Date Written: June 8, 2004


A vast empirical literature has documented delayed and persistent effects of monetary policy shocks on output. We show that this finding results from the aggregation of output impulse-responses that differ sharply depending on the timing of the shock: When the monetary policy shock takes place in the first two quarters of the year, the response of output is quick, sizable, and dies out at a relatively fast pace. In contrast, output responds very little when the shock takes place in the third or fourth quarters. We propose a potential explanation for the differential responses based on uneven staggering of wage contracts across quarters. Using a stylized dynamic general equilibrium model, we show that a very modest amount of uneven staggering can generate differences in output responses similar to those found in the data.

JEL Classification: E1, E52, E58, E32, E31

Suggested Citation

Olivei, Giovanni and Tenreyro, Silvana, The Timing of Monetary Policy Shocks (June 8, 2004). Available at SSRN: or

Giovanni Olivei

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Silvana Tenreyro (Contact Author)

London School of Economics (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom