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Regional Asymmetries in the Impact of Monetary Policy Shocks on Prices: Evidence from US Cities

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Author Info

  • David Fielding

    ()
    (Department of Economics, University of Otago)

  • Kalvinder Shields

    ()
    (Department of Economics, University of Melbourne)

Abstract

Deviations from the Law of One Price across US cities are smaller than corresponding international deviations, but nevertheless substantial. We find that a proportion of these deviations can be explained by asymmetric responses to federal monetary policy shocks, and that a large part of the asymmetry can be explained by city-specific economic characteristics.

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File URL: http://www.business.otago.ac.nz/econ/research/discussionpapers/DP_0702.pdf
File Function: First version, 2007
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Bibliographic Info

Paper provided by University of Otago, Department of Economics in its series Working Papers with number 0702.

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Length: 22 pages
Date of creation: Feb 2007
Date of revision: Feb 2007
Handle: RePEc:otg:wpaper:0702

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Keywords: Law of One Price; monetary policy shocks;

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References

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  1. Stewart, Chris, 2006. "Spurious correlation of I(0) regressors in models with an I(1) dependent variable," Economics Letters, Elsevier, vol. 91(2), pages 184-189, May.
  2. Benigno, Pierpaolo, 2001. "Optimal Monetary Policy in a Currency Area," CEPR Discussion Papers 2755, C.E.P.R. Discussion Papers.
  3. Daniel Gros & Carsten Hefeker, 2000. "One Size Must Fit All. National Divergences in a Monetary Union," CESifo Working Paper Series 326, CESifo Group Munich.
  4. Nick Chamie & Alain DeSerres & Rene Lalonde, 1994. "Optimum Currency Areas and Shock Asymmetry A Comparison of Europe and the United States," International Finance 9406001, EconWPA, revised 23 Jun 1994.
  5. Adam Elbourne & Jakob de Haan, 2004. "Asymmetric Monetary Transmission in EMU: The Robustness of VAR Conclusions and Cecchetti’s Legal Family Theory," CESifo Working Paper Series 1327, CESifo Group Munich.
  6. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
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Cited by:
  1. Alagidede, Paul & Coleman, Simeon & Cuestas, Juan Carlos, 2012. "Inflationary shocks and common economic trends: Implications for West African monetary union membership," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 460-475.
  2. Matteo Luciani & Antoniomaria Conti & Matteo Barigozzi, 2013. "Do Euro Area Countries Respond Asymmetrically to the Common Monetary Policy?," ULB Institutional Repository 2013/153330, ULB -- Universite Libre de Bruxelles.
  3. Matteo Barigozzi & Antonio M. Conti & Matteo Luciani, 2013. "Do euro area countries respond asymmetrically to the common monetary policy?," Temi di discussione (Economic working papers) 923, Bank of Italy, Economic Research and International Relations Area.
  4. Coleman, Simeon, 2012. "Where Does the Axe Fall? Inflation Dynamics and Poverty Rates: Regional and Sectoral Evidence for Ghana," World Development, Elsevier, vol. 40(12), pages 2454-2467.

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