Description:

Sanjay Singh (UC Davis/SF Fed): "The long-run effects of monetary policy" with Oscar Jorda and Alan M. Taylor

Abstract: We document that the real effects of monetary shocks last for over a decade. Our approach relies on (1) identification of exogenous and non-systematic monetary shocks using the trilemma of international finance; (2) merged data from two new international historical
cross-country databases; and (3) econometric methods robust to long-horizon inconsistent
estimates. Notably, the capital stock and total factor productivity (TFP) exhibit strong hysteresis, while labor does not. Allowing for asymmetry, we find these effects are present
when interest rates tighten, but not when they loosen. We also compare our findings to
other monetary shocks studied in the literature.