Structural Breaks and Regional Disparities in the Transmission of Monetary Policy

FRB of St. Louis Working Paper No. 2003-008C

38 Pages Posted: 29 Aug 2006

See all articles by Michael Owyang

Michael Owyang

Federal Reserve Bank of St. Louis - Research Division

Howard J. Wall

Lindenwood University - Center for Economics and the Environment

Date Written: February 2005

Abstract

Using a regional VAR, we find large differences in the effects of monetary policy shocks across regions of the United States. We also find that the region-level effects of monetary policy differ a great deal between the pre-Volcker and Volcker-Greenspan periods in terms of their depth and length. The two sample periods also yield very different rankings of the regions in terms of the effects of monetary policy. We find that regional difference in the depths of recession are related to the banking concentration, whereas differences in the total cost of recession are related to industry mix. Finally, we demonstrate that the differences between the two sample periods are due to changes in the mechanism by which monetary policy shocks are propagated.

Keywords: Regional monetary policy

JEL Classification: E52, R12

Suggested Citation

Owyang, Michael T. and Wall, Howard J., Structural Breaks and Regional Disparities in the Transmission of Monetary Policy (February 2005). FRB of St. Louis Working Paper No. 2003-008C, Available at SSRN: https://ssrn.com/abstract=927240 or http://dx.doi.org/10.2139/ssrn.927240

Michael T. Owyang (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Howard J. Wall

Lindenwood University - Center for Economics and the Environment ( email )

209 S. Kingshighway
St. Charles, MO 63301
United States

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