The Timing of Monetary Policy Shocks
Giovanni Olivei, Silvana Tenreyro
American Economic Review · 2007 · Volume 97 · Issue 3
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 dynamic general equilibrium model, we show that a realistic amount of uneven staggering can generate differences in output responses quantitatively similar to those found in the data. (JEL E23, E24, E58, J41)
Keywords
Macroeconomics: Production, Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Central Banks and Their Policies, Labor Contracts
Enable JavaScript for citation tools and additional paper interactions.