We revisit recent evidence on how monetary policy affects output and prices in the U.S. and in the euro area. The response patterns to a shift in monetary policy are similar in most respects, but differ noticeably as to the composition of output changes. In the euro area investment is the predominant driver of output changes, while in the U.S. consumption shifts are significantly more important. We dub this difference the output composition puzzle and explore its implications and several potential explanations for it.
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Article provided by Federal Reserve Bank of Cleveland in its journal Proceedings.
Volume (Year): (2003) Issue (Month): () Pages: 1265-1317 Download reference. The following formats are available: HTML,
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