Kreamer, Jonathan <br/><br/>
Eectoral heterogeneity and monetary policy 

 - American Economic Journal: Macroeconomics   
 - 14(2), Apr, 2022: p.123-159 
<br/><br/> 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