Heterogeneity in Macroeconomics and its Implications for Monetary Policy [Paperback]

Fabian Schnell develops a model indicating that by keeping real interest rates too low, monetary policy can distort the allocation of resources across firms and potentially delay economic recovery after a recession. This is a new channel of monetary policy that is especially relevant in view of Quantitative Easing programs. A second model focuses on the short-term implications of heterogeneously productive firms, showing an acceleration effect of technology shocks. Finally, an empirical investigation of firms price-setting behaviors shows that time-dependent factors, relative to state-dependent ones, play a small role with respect to the probability and the size of a price change. All results provide new insights for monetary policy.

Introduction: Heterogeneity and Macroeconomics.-?Can Monetary Policy Delay the Reallocation of Capital?.- Business Cycles and Monetary Policy with Productivity Heterogeneity.-?What Determines Price Changes and the Distribution of Prices? Evidence from the Swiss CPI.

Fabian Schnell develops a model indicating that by keeping real interest rates too low, monetary policy can distort the allocation of resources across firms and potentially delay economic recovery after a recession. This is a new channel of monetary policy that is especially relevant in view of Quantitative Easing programs. A second model focuses on the short-term implications of heterogeneously productive firms, showing an acceleration effect of technology shocks. Finally, an empirical investigation of firms price-setting behaviors shows that time-dependent factors, relative to state-dependent ones, play a small role with respect to the probability and the size of a price change. All results provide new insights for monetary policy.

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