Research finds productivity impact from monetary policy
Paper sets out model of supply-side transmission channel, which can lead to flatter Phillips curve
New research outlines a channel through which monetary policy can impact productivity, challenging conventional wisdom but offering theoretical backing to a result that appears in the data.
“How does monetary policy affect an economy’s productivity? The standard thinking is that it does not,” the authors write. But, they add, empirical studies have found that nominal demand shocks – such as monetary policy shocks – do have a significant effect on productivity.
The paper was authored by David
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