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TRANSMISSION OF MONETARY POLICY SHOCKS: DO INPUT–OUTPUT INTERACTIONS MATTER?

Published online by Cambridge University Press:  21 March 2019

Aarti Singh  and
Stefano Tornielli Di Crestvolant
Aarti Singh*
Affiliation:
University of Sydney
Stefano Tornielli Di Crestvolant
Affiliation:
University of Sydney
*
Address correspondence to: Aarti Singh, Level 5, Social Sciences Building, A02, The University of Sydney, NSW 2006, Australia. e-mail: aarti.singh@sydney.edu.au. Phone: +61 (0) 2 9351 3324. Fax: +61 (0) 2 9351 4341.
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Abstract

We examine whether input–output interactions among industries impact the transmission of monetary policy shocks through the economy. Using vector autoregressive (VAR) methods we find evidence of heterogeneity in the output response to a monetary policy shock in both finished goods industries and intermediate goods industries. While output responses in finished goods industries can be related to heterogeneity in industry characteristics, this relationship is not so obvious for intermediate goods industries. For the intermediate goods industries in our sample, we find new evidence of demand-spillover effects that impact the transmission of monetary policy via input–output linkages.

Keywords

Monetary Policy TransmissionInput–OutputVARIntermediate Goods
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 8 , December 2020 , pp. 1881 - 1903
Copyright
© 2019 Cambridge University Press

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