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Monetary Policy and Investment Dynamics: Evidence from Disaggregate Data

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  • GREGORY E. GIVENS
  • ROBERT R. REED

Abstract

We use data on the components of private fixed investment (PFI) to estimate industry‐level responses of real investment and capital prices to unanticipated monetary policy. The response functions derive from a restricted large‐scale vector autoregression. Results point to significant cross‐sector heterogeneity in PFI prices and quantities, which we interpret as evidence of asymmetry in the transmission mechanism. For assets belonging to the equipment category of fixed investment, we find that quantities rather than prices absorb most of the fallout from a policy innovation. By contrast, price effects tend to be higher and output effects lower for nonresidential structures.

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  • Gregory E. Givens & Robert R. Reed, 2018. "Monetary Policy and Investment Dynamics: Evidence from Disaggregate Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(8), pages 1851-1878, December.
    • Handle: RePEc:wly:jmoncb:v:50:y:2018:i:8:p:1851-1878
    DOI: 10.1111/jmcb.12519
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    2. N. Brovkina E. & Н. Бровкина Е., 2019. "Направления инновационного развития кредитного рынка и его роль в содействии росту национальной экономики // Trends in the Innovative Development of the Credit Market and Its Role in Promoting the Nat," Экономика. Налоги. Право // Economics, taxes & law, ФГОБУ "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 12(3), pages 59-67.
    3. de la Horra, Luis P. & Perote, Javier & de la Fuente, Gabriel, 2021. "Monetary policy and corporate investment: A panel-data analysis of transmission mechanisms in contexts of high uncertainty," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 609-624.
    4. Ume, Ejindu, 2018. "The impact of monetary policy on housing market activity: An assessment using sign restrictions," Economic Modelling, Elsevier, vol. 68(C), pages 23-31.
    5. Dallari, Pietro & Ribba, Antonio, 2020. "The dynamic effects of monetary policy and government spending shocks on unemployment in the peripheral Euro area countries," Economic Modelling, Elsevier, vol. 85(C), pages 218-232.
    6. Zorn, Peter, 2016. "Investment under Rational Inattention: Evidence from US Sectoral Data," VfS Annual Conference 2016 (Augsburg): Demographic Change 145572, Verein für Socialpolitik / German Economic Association.
    7. Pietro Dallari & Antonio Ribba, 2019. "The Dynamic Effects of Monetary Policy and Government Spending Shocks on Unemployment in the Peripheral Euro Area Countries," Department of Economics 0143, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".
    8. Reed, Robert R. & Ume, Ejindu S., 2019. "Housing, liquidity risk, and monetary policy," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 138-162.

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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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