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Market Concentration, Macroeconomic Uncertainty and Monetary Policy

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Author Info
Juan de Dios Tena
Francesco Giovannoni ()

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Abstract

This paper studies the effect of market structure and macroeconomic uncertainty on the transmission of monetary policy. We motivate our analysis with a simple model which predicts that: 1) investment and production in more concentrated sectors are more affected by demand changes and 2) high uncertainty makes investment and production more sensitive to demand changes. The empirical analysis estimates the effect of monetary shocks on sectoral output for different sectors in the US using different structural vector autoregressive VAR approaches. The results are largely consistent with the proposed theory.

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File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp05576.pdf
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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 05/576.

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Length: 39 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:bri:uobdis:05/576

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Related research
Keywords: Market concentration; macroeconomic uncertainty; monetary policy transmission; vector autoregressive models.;

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; 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
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  7. Simon Price, . "Aggregate uncertainty, investment and asymmetric adjustment in the UK manufacturing sector," Economics Discussion Papers 441, University of Essex, Department of Economics.
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  8. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February. [Downloadable!] (restricted)
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  9. Gertler, Mark & Gilchrist, Simon, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 309-40, May. [Downloadable!] (restricted)
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  12. Kaplan, Steven N & Zingales, Luigi, 1997. "Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 169-215, February.
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  15. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-1), pages 135-174. [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. J. de Dios Tena & Edoardo Otranto, 2008. "A Realistic Model for Official Interest Rates," Working Paper CRENoS 200802, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
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