| Effects of Monetary Policy Shocks across Time and across Sectors Contributor(s): Federal Reserve Board (Author) |
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ISBN: 1503231240 ISBN-13: 9781503231245 Publisher: Createspace Independent Publishing Platform OUR PRICE: $14.20 Product Type: Paperback Published: November 2014 |
| Additional Information |
| BISAC Categories: - Business & Economics | Money & Monetary Policy |
| Physical Information: 0.07" H x 8.5" W x 11.02" (0.22 lbs) 32 pages |
| Descriptions, Reviews, Etc. |
| Publisher Description: Recent empirical research by Olivei and Tenreyro (2007) demonstrates that the effect of monetary policy shocks on output and prices depends on the shock's timing: In the United States, a monetary policy shock that takes place in the first half of the year has a larger effect on output than on prices, while the opposite is true in the second half of the year. Olivei and Tenreyro argue that this finding reflects the fact that a greater fraction of wage rates are re-contracted in the second half of the year, implying that wages (and prices) are less flexible in the first half. In this paper, I assess this explanation in light of several additional empirical results. Most importantly, I demonstrate that within-year differences in the responses of output and prices following a monetary policy shock are not more pronounced in the service-producing sector, where labor costs represent a larger fraction of total production costs. I also find that movements in prices following a monetary shock tend to lead wage changes. These and other empirical results suggest that something other than uneven wage adjustment might be responsible for the differential within-year effect of monetary policy shocks that Olivei and Tenreyro document. |