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Does Monetary Policy Help Least Those Who Need It Most?

Author

Listed:
  • Michael S. Hanson

    (Economics Department, Wesleyan University)

  • Erik Hurst

    (University of Chicago GSB, and NBER)

  • Ki Young Park

    (University of Chicago)

Abstract

We estimate the impact of U.S. monetary policy on the cross-sectional distribution of state economic activity for a 35-year panel. Our results indicate that the effects of policy have a significant history dependence, in that relatively slow growth regions contract more following contractionarymonetary shocks. Moreover, policy is asymmetric, in that expansionary shocks have less of a beneficial impact upon relatively slow growth areas. As a result, we conclude that monetary policy on average widens the dispersion of growth rates among U.S. states, and those locations initially at the low end of the cross-sectional distribution benefit least from any given change inmonetary policy.

Suggested Citation

  • Michael S. Hanson & Erik Hurst & Ki Young Park, 2006. "Does Monetary Policy Help Least Those Who Need It Most?," Wesleyan Economics Working Papers 2006-006, Wesleyan University, Department of Economics.
    • Handle: RePEc:wes:weswpa:2006-006
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    File URL: http://repec.wesleyan.edu/pdf/mshanson/2006006_hanson.pdf
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    References listed on IDEAS

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    1. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    2. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
    3. Choi, Woon Gyu, 1999. "Asymmetric Monetary Effects on Interest Rates across Monetary Policy Stances," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(3), pages 386-416, August.
    4. Michael T. Owyang & Howard J. Wall, 2004. "Structural breaks and regional disparities in the transmission of monetary policy," Working Papers 2003-008, Federal Reserve Bank of St. Louis.
    5. Hanson, Michael S., 2004. "The "price puzzle" reconsidered," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1385-1413, October.
    6. 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.
    7. Fratantoni, Michael & Schuh, Scott, 2003. "Monetary Policy, Housing, and Heterogeneous Regional Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 35(4), pages 557-589, August.
    8. Jeremy C. Stein & Anil K. Kashyap, 2000. "What Do a Million Observations on Banks Say about the Transmission of Monetary Policy?," American Economic Review, American Economic Association, vol. 90(3), pages 407-428, June.
    9. James Peery Cover, 1992. "Asymmetric Effects of Positive and Negative Money-Supply Shocks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1261-1282.
    10. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, March.
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    Cited by:

    1. Michael Artis & Christian Dreger & Konstantin Kholodilin, 2009. "Common and spatial drivers in regional business cycles," Centre for Growth and Business Cycle Research Discussion Paper Series 118, Economics, The University of Manchester.
    2. Angeliki ANAGNOSTOU & Stephanos PAPADAMOU, 2014. "The Impact Of Monetary Shocks On Regional Output: Evidence From Four South Eurozone Countries," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 39, pages 105-130.
    3. Francis Neville & Owyang Michael T. & Sekhposyan Tatevik, 2012. "The Local Effects of Monetary Policy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(2), pages 1-38, March.
    4. Michael Artis & Christian Dreger & Konstantin Kholodilin, 2011. "What Drives Regional Business Cycles? The Role Of Common And Spatial Components," Manchester School, University of Manchester, vol. 79(5), pages 1035-1044, September.
    5. Masagus M. Ridhwan & Henri L. F. Groot & Piet Rietveld & Peter Nijkamp, 2014. "The Regional Impact of Monetary Policy in Indonesia," Growth and Change, Wiley Blackwell, vol. 45(2), pages 240-262, June.

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    More about this item

    Keywords

    Monetary policy; asymmetric effects; state dependence; regional business cycles;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E59 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Other
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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