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Production network structure and the impact of the monetary policy shocks: Evidence from the OECD

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  • Caraiani, Petre
  • Dutescu, Adriana
  • Hoinaru, Răzvan
  • Stănilă, Georgiana Oana

Abstract

We aim to answer the question on whether the production structure influences the transmission of monetary policy shocks. For 24 OECD economies, we estimate time-varying Bayesian VARs and compute the time-varying impulse response functions of GDP to monetary shocks. We analyze the production network structure using specific network measures. When looking at the relationship between the production networks measures and the impact of monetary policy shocks on GDP, upstreamness and downstreamness are found significant. We also identify an amplifying role for real estate and the financial intermediation sectors.

Suggested Citation

  • Caraiani, Petre & Dutescu, Adriana & Hoinaru, Răzvan & Stănilă, Georgiana Oana, 2020. "Production network structure and the impact of the monetary policy shocks: Evidence from the OECD," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s016517652030183x
    DOI: 10.1016/j.econlet.2020.109271
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    References listed on IDEAS

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    1. Pasten, Ernesto & Schoenle, Raphael & Weber, Michael, 2020. "The propagation of monetary policy shocks in a heterogeneous production economy," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 1-22.
    2. Jing Cynthia Wu & Fan Dora Xia, 2016. "Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 253-291, March.
    3. Jordi Galí & Luca Gambetti, 2015. "The Effects of Monetary Policy on Stock Market Bubbles: Some Evidence," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(1), pages 233-257, January.
    4. Daron Acemoglu & Ufuk Akcigit & William Kerr, 2016. "Networks and the Macroeconomy: An Empirical Exploration," NBER Macroeconomics Annual, University of Chicago Press, vol. 30(1), pages 273-335.
    5. Michael Weber & Ali Ozdagli, 2016. "Monetary Policy Through Production Networks: Evidence from the Stock Market," 2016 Meeting Papers 148, Society for Economic Dynamics.
    6. Antrà s, Pol & Chor, Davin, 2017. "On the Measurement of Upstreamness and Downstreamness in Global Value Chains," CEPR Discussion Papers 12549, C.E.P.R. Discussion Papers.
    7. Michael Weber & Ali Ozdagli, 2016. "Monetary Policy Through Production Networks: Evidence from the Stock Market," 2016 Meeting Papers 148, Society for Economic Dynamics.
    8. Caraiani, Petre, 2019. "Oil shocks and production network structure: Evidence from the OECD," Energy Economics, Elsevier, vol. 84(C).
    9. repec:zbw:bofrdp:urn:nbn:fi:bof-201512101464 is not listed on IDEAS
    10. repec:zbw:bofrdp:2015_025 is not listed on IDEAS
    11. Giorgio E. Primiceri, 2005. "Time Varying Structural Vector Autoregressions and Monetary Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 821-852.
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    Cited by:

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