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The differential regional effects of monetary policy: evidence from the U.S. States

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Listed author(s):
  • Gerald A. Carlino
  • Robert H. DeFina

Abstract

This paper uses time-series techniques to examine whether monetary policy has similar effects across U.S. states during the 1958-92 period. Impulse response functions from estimated structural vector autoregression models reveal differences in state policy responses, which in some cases are substantial. The paper also provides evidence on the reasons for the measured cross-state differential policy responses. The size of a state's response is significantly related to its industry mix, evidence of an interest rate channel for monetary policy. The state-level data offer no support for recently advanced credit-channel theories of the monetary policy transmission mechanism.

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File URL: https://www.philadelphiafed.org/-/media/research-and-data/publications/working-papers/1997/wp97-12.pdf?la=en
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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 97-12.

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Date of creation: 1997
Date of revision: 01 Mar 1998
Handle: RePEc:fip:fedpwp:97-12
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Keywords: Monetary policy ; Regional economics ; Time-series analysis;

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  9. Peek, Joe & Rosengren, Eric, 1995. "The Capital Crunch: Neither a Borrower nor a Lender Be," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 625-638, August.
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  13. Bernanke, Ben S. & Mihov, Ilian, 1995. "Measuring Monetary Policy," Economics Series 10, Institute for Advanced Studies.
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  15. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  16. R. Glenn Hubbard, 1995. "Is there a "credit channel" for monetary policy?," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 63-77.
  17. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
  18. Carlino Gerald & Defina Robert, 1995. "Regional Income Dynamics," Journal of Urban Economics, Elsevier, vol. 37(1), pages 88-106, January.
  19. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
  20. Bernanke, Ben S & Blinder, Alan S, 1988. "Credit, Money, and Aggregate Demand," American Economic Review, American Economic Association, vol. 78(2), pages 435-439, May.
  21. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(2), pages 1-78.
  22. Boschen, John F & Mills, Leonard O, 1995. "The Relation between Narrative and Money Market Indicators of Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 33(1), pages 24-44, January.
  23. Strongin, Steven, 1995. "The identification of monetary policy disturbances explaining the liquidity puzzle," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 463-497, June.
  24. Hoover, Kevin D. & Perez, Stephen J., 1994. "Post hoc ergo propter once more an evaluation of 'does monetary policy matter?' in the spirit of James Tobin," Journal of Monetary Economics, Elsevier, vol. 34(1), pages 47-74, August.
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