Monetary Policy through Production Networks: Evidence from the Stock Market / Ali Ozdagli, Michael Weber.

Format:

Book

Author/Creator:

Ozdagli, Ali.

Contributor:

National Bureau of Economic Research.

Weber, Michael (Professor of finance)

Series:

Working Paper Series (National Bureau of Economic Research) no. w23424.

NBER working paper series no. w23424

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Monetary Policy through Production Networks

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

Monetary policy shocks have a large impact on stock returns in narrow windows around press releases by the Federal Reserve. We use spatial autoregressions to decompose the overall effect of monetary policy shocks into a direct effect and an indirect (network) effect. We attribute 50%-85% of the overall effect to indirect effects. The decomposition is a robust feature of the data and we confirm large indirect effects in realized cash-flow fundamentals. A simple model with intermediate inputs guides our empirical strategy. Our findings indicate that production networks might be an important propagation mechanism of monetary policy to the real economy.

Notes:

Print version record

May 2017.