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Technological Shocks and the Conduct of Monetary Policy

  • Mario Amendola
  • Jean-Luc Gaffard
  • Francesco Saraceno

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.

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Article provided by Presses de Sciences-Po in its journal Revue économique.

Volume (Year): 55 (2004)
Issue (Month): 6 ()
Pages: 1241-1263

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Handle: RePEc:cai:recosp:reco_556_1241
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  1. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804.
  2. 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.
  3. Galí, Jordi, 2002. "New Perspectives on Monetary Policy, Inflation and the Business Cycle," CEPR Discussion Papers 3210, C.E.P.R. Discussion Papers.
  4. Hicks, John, 1989. "A Market Theory of Money," OUP Catalogue, Oxford University Press, number 9780198287247.
  5. 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, 03.
  6. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  7. Hicks, John, 1990. "The Unification of Macro-economics," Economic Journal, Royal Economic Society, vol. 100(401), pages 528-38, June.
  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, 02.
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