Monetary shocks have a much larger impact on output in oligopolistic markets, according to a staff report published by the Federal Reserve Bank of Minneapolis.

Researcher Simon Mongey relaxes the assumption in many standard models that markets are competitive, which he notes is often not true of product markets. Replacing competition with an oligopolistic structure dampens firms’ price response to monetary shocks, he writes.

This is important for the neutrality of money, the idea that monetary