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Technological Shocks and the Conduct of Monetary Policy

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  • Mario Amendola
  • Jean-Luc Gaffard
  • Francesco Saraceno

Abstract

This paper analyses the impact of alternative monetary policies on the performances of an economy facing technological changes. It shows that the restructuring of productive capacity necessary to embed the new technologies usually implies initial drops in employment and productivity, that are reabsorbed only if the transition is successful. Furthermore, it shows that the process disrupts the financial structure of firms (the coordination over time of costs and revenues), and makes external financing crucial for a successful restructuring. An “optimal” monetary policy, in this framework, should then be expansionary during the transition, and tighten once the technological advance is embedded in the system. Thus, we reach conclusions that are in sharp contrast with the policy prescriptions of the New Keynesian approach.

Suggested Citation

  • Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2004. "Technological Shocks and the Conduct of Monetary Policy," Revue économique, Presses de Sciences-Po, vol. 55(6), pages 1241-1263.
  • Handle: RePEc:cai:recosp:reco_556_1241
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    References listed on IDEAS

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    1. Jeremy Greenwood & Boyan Jovanovic, 2001. "Accounting for Growth," NBER Chapters,in: New Developments in Productivity Analysis, pages 179-224 National Bureau of Economic Research, Inc.
    2. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    3. Raouf Boucekkine & Fernando del Río & Omar Licandro, 2003. "Embodied Technological Change, Learning-by-doing and the Productivity Slowdown," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(1), pages 87-98, March.
    4. Hicks, John, 1990. "The Unification of Macro-economics," Economic Journal, Royal Economic Society, vol. 100(401), pages 528-538, June.
    5. Hicks, John, 2017. "A Market Theory of Money," OUP Catalogue, Oxford University Press, number 9780198796237.
    6. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804.
    7. Jordi Gali, 2002. "New Perspectives on Monetary Policy, Inflation, and the Business Cycle," NBER Working Papers 8767, National Bureau of Economic Research, Inc.
    8. Marie Amendola & Jean-Luc Gaffard, 2003. "Persistent unemployment and co-ordination issues: an evolutionary perspective," Journal of Evolutionary Economics, Springer, vol. 13(1), pages 1-27, February.
    9. Hicks, John, 1977. "Economic Perspectives: Further Essays on Money and Growth," OUP Catalogue, Oxford University Press, number 9780198284079.
    10. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
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    Cited by:

    1. Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2012. "Production Process Heterogeneity, Time to Build, and Macroeconomic Performance," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 263-294.
    2. Jean-Luc Gaffard, 2008. "Innovation, competition, and growth: Schumpeterian ideas within a Hicksian framework," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 295-311, August.

    More about this item

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E - Macroeconomics and Monetary Economics

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