The industry effects of monetary policy and their welfare implications
AbstractEconomic theory provides at least two explanations for differential regional effects of a common monetary policy. The traditional money view focuses on regional differences in industry mix. Alternatively, the more recent credit view emphasizes differences in financial structure. This paper aims to make two contributions. First, building on the work by Carlino and DeFina (1998), I estimate impulse responses of sector earnings to monetary policy shocks for regions of the United States. An analysis of variance shows that the sector effect dominates the regional effect, providing further evidence for the importance of the industry mix. Second, the paper addresses the welfare implications of industry effects of monetary policy. One would expect industries suffering disproportionately from the impact of monetarypolicy to compensate their employees and shareholders. The US evidence on compensating wage and return differentials is, however, mixed.
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Bibliographic InfoArticle provided by Banca Nazionale del Lavoro in its journal BNL Quarterly Review.
Volume (Year): 53 (2013)
Issue (Month): 214 ()
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Other versions of this item:
- Ivo J.M. Arnold, 2013. "The industry effects of monetary policy and their welfare implications," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 53(214), pages 287-315.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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