MACRO: The Geographic Effects of Monetary Policy Shocks; Dr Juan Herreño (University of California, San Diego)

Abstract

We estimate the differential effects of monetary policy shocks across US regions. The reaction of prices and employment varies substantially across metropolitan areas in the United States. There is a positive covariance of the price and employment effects of monetary policy across regions. These patterns are consistent with New Keynesian models of a monetary union where regions have different shares of hand-to-mouth consumers. Regions with a higher sensitivity to monetary policy in prices and employment are low-income metropolitan areas. The model predicts that monetary policy shocks create large differences in consumption and real wages across space.

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