Monetary Policy and Sectoral Shocks : Did the Federal Reserve React Properly to the High-Tech Crisis?
The authors present an identification strategy that allows them to study the sectoral effects of monetary policy and the role that monetary policy plays in the transmission of sectoral shocks. They apply their methodology to the case of the United...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/11/2811632/monetary-policy-sectoral-shocks-federal-reserve-react-properly-high-tech-crisis http://hdl.handle.net/10986/17898 |
| Summary: | The authors present an identification
strategy that allows them to study the sectoral effects of
monetary policy and the role that monetary policy plays in
the transmission of sectoral shocks. They apply their
methodology to the case of the United States and find some
significant differences in the sectoral responses to
monetary policy. They also find that monetary policy is a
significant source of sectoral transfers. In particular, a
shock to equipment and software investment, which one
identifies with the high-tech crisis, induces a response by
the monetary authority that generates a temporary boom in
residential investment and durables consumption but has
almost no effect on the high-tech sector. Finally, the
authors perform an exercise evaluating the model's
predictions about the automatic and more aggressive monetary
policy response to a shock similar to the one that hit the
United States in early 2001. They find that the actual drop
in interest rates is in line with the predictions of the model. |
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