Eectoral heterogeneity and monetary policy
By: Kreamer, Jonathan
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Material type: 
BookPublisher: American Economic Journal: Macroeconomics Description: 14(2), Apr, 2022: p.123-159.
In:
American Economic Journal: MacroeconomicsSummary: Since sectors differ in their sensitivity to interest rates, monetary policy produces inefficient sectoral fluctuations. In a model with sectoral heterogeneity, I show that policymakers should weight sectors proportionally to their interest elasticities, account for dynamic demand effects from durable goods, and systematically utilize forward guidance to reduce sectoral volatility. A calibrated model confirms these recommendations and finds that neglecting sectoral volatility produces substantial welfare losses. The best-performing policy rule stabilizes a sectorally weighted measure of inflation, plus lags of past durable inflation. – Reproduced
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 14(2), Apr, 2022: p.123-159 | Available | AR126965 |
Since sectors differ in their sensitivity to interest rates, monetary policy produces inefficient sectoral fluctuations. In a model with sectoral heterogeneity, I show that policymakers should weight sectors proportionally to their interest elasticities, account for dynamic demand effects from durable goods, and systematically utilize forward guidance to reduce sectoral volatility. A calibrated model confirms these recommendations and finds that neglecting sectoral volatility produces substantial welfare losses. The best-performing policy rule stabilizes a sectorally weighted measure of inflation, plus lags of past durable inflation. – Reproduced
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