American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Timing of Monetary Policy Shocks
American Economic Review
vol. 97,
no. 3, June 2007
(pp. 636–663)
Abstract
A vast empirical literature has documented delayed and persistent effects of monetary policy shocks on output. We show that this finding results from the aggregation of output impulse responses that differ sharply depending on the timing of the shock. When the monetary policy shock takes place in the first two quarters of the year, the response of output is quick, sizable, and dies out at a relatively fast pace. In contrast, output responds very little when the shock takes place in the third or fourth quarter. We propose a potential explanation for the differential responses based on uneven staggering of wage contracts across quarters. Using a dynamic general equilibrium model, we show that a realistic amount of uneven staggering can generate differences in output responses quantitatively similar to those found in the data. (JEL E23, E24, E58, J41)Citation
Olivei, Giovanni, and Silvana Tenreyro. 2007. "The Timing of Monetary Policy Shocks." American Economic Review, 97 (3): 636–663. DOI: 10.1257/aer.97.3.636Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- E58 Central Banks and Their Policies
- J41 Labor Contracts