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Firm-specific factors and the state-dependent effects of monetary policy

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  • Hayk Kamalyan

Abstract

This article demonstrates that firm-specific capital generates non-linear output responses to monetary policy shocks across the business cycle. The implied concave relationship between desired reset prices and aggregate demand conditions results in stronger output responses to monetary measures in expansionary states. The above mechanism alone explains procyclical output response to monetary policy shocks in a canonical sticky-price model. This model feature is supported by empirical evidence from a smooth transition local projection model.

Suggested Citation

  • Hayk Kamalyan, 2025. "Firm-specific factors and the state-dependent effects of monetary policy," Oxford Economic Papers, Oxford University Press, vol. 77(3), pages 867-884.
    • Handle: RePEc:oup:oxecpp:v:77:y:2025:i:3:p:867-884.
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    File URL: http://hdl.handle.net/10.1093/oep/gpaf005
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    Keywords

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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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