Working Paper: NBER ID: w14996
Authors: Harald Uhlig
Abstract: This paper compares monetary policy in the US and EMU during the last decade, employing an estimated hybrid New Keynesian cash-in-advance model, driven by five shocks. It appears that the difference between the two monetary policies between 1998 and 2006 is due to both surprises in productivity as well as surprises in wage demands, moving interest rates in opposite directions in Europe and the US, but not due to a more sluggish response in Europe to the same shocks or to different monetary policy surprises.
Keywords: Monetary Policy; Europe; US; Productivity Shocks; Wage Demands
JEL Codes: E32; E50; E52; E58; E63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| productivity shocks (US) (O49) | interest rates (US) (E43) |
| productivity shocks (Europe) (O52) | interest rates (Europe) (E43) |
| wage demands (US) (J31) | interest rates (US) (E43) |
| wage demands (Europe) (J39) | interest rates (Europe) (E43) |
| productivity shocks (US) (O49) | monetary policy (US) (E52) |
| wage demands (US) (J31) | monetary policy (US) (E52) |
| productivity shocks (Europe) (O52) | monetary policy (Europe) (E52) |
| wage demands (Europe) (J39) | monetary policy (Europe) (E52) |