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The cross-industry effects of unanticipated money in an equilibrium business cycle model

Authors
Journal
Journal of Monetary Economics
0304-3932
Publisher
Elsevier
Publication Date
Volume
23
Issue
2
Identifiers
DOI: 10.1016/0304-3932(89)90052-4
Disciplines
  • Economics

Abstract

Abstract This paper examines the differential real effects of monetary policy across industries. The purpose is to test whether these differential effects can be accounted for by an incomplete-information, rational-expectations model of the business cycle, in the Lucas-Barro tradition. Such a model implies a positive relation across markets between the variability of market-specific shocks and the reduced-form output effect of a monetary shock. This proposition is tested using industry-level post-war U.S. data, and support is found. The exploration also uncovers other interesting industry-level and aggregate results.

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