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The Long-Run Effects of Monetary Policy

Òscar Jordà¹; Sanjay R Singh²; Alan M. Taylor^3,4,5

¹ Federal Reserve Bank of San Francisco and Department of Economics, University of California, Davis [email protected], [email protected] · ² Federal Reserve Bank of San Francisco and Department of Economics, University of California, Davis [email protected], [email protected] · ³ Columbia University · ⁴ NBER · ⁵ CEPR [email protected]

Abstract We document that the real effects of monetary shocks last for over a decade. Our approach relies on (1) identification of exogenous and non-systematic monetary shocks using the trilemma of international finance; (2) merged data from two new international historical cross-country databases; and (3) econometric methods robust to long-horizon inconsistent estimates. Notably, the capital stock and total factor productivity (TFP) exhibit greater hysteresis than labor. When we allow for asymmetry, we find these effects with tightening shocks, but not with loosening shocks. When extending the horizon of the responses reported in several recent studies that use alternative monetary shocks, we find similarly persistent real effects, thus supporting our main findings.

DOI

10.1162/rest_a_01527

Pages

1-49

Language

en

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crossref openalex