The Timing of Monetary Policy Shocks
53 Pages Posted: 10 Aug 2006
There are 2 versions of this paper
Date Written: June 2006
Abstract
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 quarter. 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.
Keywords: Monetary policy, business cycles, nominal rigidity, impulse-response function
JEL Classification: E1, E31, E32, E52, E58
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
How are Firms' Wages and Prices Linked: Survey Evidence in Europe
By Martine Druant, Silvia Fabiani, ...
-
How Are Firms’ Wages and Prices Linked: Survey Evidence In Europe
By Martine Druant, Silvia Fabiani, ...
-
How are Firms' Wages and Prices Linked: Survey Evidence in Europe
By Martine Druant, Silvia Fabiani, ...
-
Does Relative Income Matter? Are the Critics Right?
By Richard Layard, Guy Mayraz, ...
-
The Timing of Monetary Policy Shocks
By Giovanni Olivei and Silvana Tenreyro
-
Some Evidence on the Importance of Sticky Wages
By Alessandro Barattieri, Susanto Basu, ...
-
Some Evidence on the Importance of Sticky Wages
By Alessandro Barattieri, Susanto Basu, ...
-
Some Evidence on the Importance of Sticky Wages
By Alessandro Barattieri, Susanto Basu, ...
-
Sticky Wages: Evidence from Quarterly Microeconomic Data
By Thomas Heckel, Hervé Le Bihan, ...
-
Downward Wage Rigidity and Optimal Steady-State Inflation
By Gabriel Fagan and Julián Messina