Conference Paper

The output composition puzzle: a difference in the monetary transmission mechanism in the euro area and United States

Abstract: We revisit recent evidence on how monetary policy affects output and prices in the U.S. and in the euro area. The response patterns to a shift in monetary policy are similar in most respects, but differ noticeably as to the composition of output changes. In the euro area investment is the predominant driver of output changes, while in the U.S. consumption shifts are significantly more important. We dub this difference the output composition puzzle and explore its implications and several potential explanations for it.

Keywords: Consumption (Economics); Transmission mechanism (Monetary policy);

Status: Published in Journal of money, credit, and banking, volume 35, no. 6, pt. 2, December 2003


Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Proceedings

Publication Date: 2003

Pages: 1265-1317