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Federal Reserve Bank of Cleveland
Proceedings
The output composition puzzle: a difference in the monetary transmission mechanism in the euro area and United States
Ignazio Angeloni
Anil K. Kashyap
Benoît Mojon
Daniele Terlizzese
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.


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Ignazio Angeloni & Anil K. Kashyap & Benoît Mojon & Daniele Terlizzese, "The output composition puzzle: a difference in the monetary transmission mechanism in the euro area and United States" , Federal Reserve Bank of Cleveland, Proceedings, pages 1265-1317, number y:2003:p:1265-1317, 2003.
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Keywords: Transmission mechanism (Monetary policy) ; Consumption (Economics)
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