This paper investigates the heterogeneous effects of monetary policy on house prices across US metropolitan areas with different urban growth. Based on a simple two-period model, we demonstrate that the interaction of population growth and land scarcity generates cross-regional heterogeneity. When undeveloped land is scarce, population growth intensifies future land shortages, leading to larger house price responses to monetary policy shocks. We then estimate the effect of housing price response following a monetary policy shock using monthly data across 375 US metropolitan statistical areas. Consistent with the theoretical proposition, we find that house prices in high urban growth areas are more responsive to monetary policy shocks than in low urban growth areas. We also construct a novel dataset on land scarcity using a recently released land cover database, and find supporting evidence for its important role in shaping housing supply and regional heterogeneity in the transmission of monetary policy to house prices.

This study estimates the dynamic effect of monetary policy on the labor share in the Euro Area. We adapt panel local projections to the Double/Debiased Machine Learning estimator, developed for causal inference in high-dimensional control settings. We find robust evidence that the labor share increases after a monetary policy tightening. The response reflects a broad contractionary transmission mechanism: output, labor productivity, employment, investment, and prices decline, while average real wages adjust less persistently. This pattern is consistent with recent evidence showing that monetary contractions raise the labor share because labor productivity falls more than real wages. Our results indicate that a causal Machine Learning estimator can recover plausible monetary policy innovations and deliver price- and production-puzzle-free responses without relying on high-frequency instruments.

Using the Gordon growth model, this paper investigates monthly fluctuations in the US housing market. The investigation is based on a vector autoregressive model with fixed coefficients that can explain the broad movements in housing volatility at the zip code level. The corresponding variance decomposition analysis further shows that the housing premium is the main driver of housing market fluctuations. Motivated by previous studies and using impulse response functions, it is also investigated how different components of the housing market respond over time to a shock in the interest rate in zip codes with different levels of income or demographics. The corresponding results reveal that the rent growth channel of monetary policy is effectively blocked in zip codes with lower income, higher female or minority populations, or lower education, while remaining functional in less vulnerable areas. These findings lead to important policy suggestions for targeted interventions.

We study real and monetary growth models with households endowed with limited foresight and planning only for a finite number of periods, despite being infinitely lived (myopia). In the real model, there emerges a unique Balanced Growth Path ($BGP$) characterized by sub-optimal capital accumulation. However, by relaxing myopia, it converges to the $BGP$ of the economy with perfect foresight. We then prove the existence of equilibria where money, even in absence of financial frictions or liquidity constraints, is positively valued and non-neutral, in contrast to usual results in infinite horizon. Specifically, there arise two monetary $BGPs$, where money is non-neutral along the first one and neutral along the second one. Eventually, we perform a global stability analysis and identify the optimal monetary policy maximizing welfare.

This paper tests the Milton Friedman hypothesis that money growth variability affects the velocity of money. It compares the Federal Reserve’s simple-sum monetary aggregates, the original (non-credit-card-augmented) Divisia aggregates, and the credit-augmented Divisia and credit-augmented Divisia inside monetary aggregates using two classes of empirical models. Standard Granger causality tests and a bivariate structural GARCH-in-Mean VAR model examine how money growth variability affects the consumption and income velocity of money. Using monthly data for the post-2006 period, when all monetary indicators are available, the findings reject the Friedman hypothesis when money supply volatility is modeled explicitly using recent advances in macroeconometrics and financial econometrics. This result is robust to a longer sample extending back to 1967 with monthly and quarterly data, across alternative model specifications. From a policy standpoint, this enhances the predictability and reliability of monetary policy actions aimed at stabilizing the economy using monetary aggregates.

I use a combination of a structural dynamic factor model and quantile regressions to study how monetary policy shocks affect the predicted distributions of GDP growth and inflation in the US. Contractionary monetary policy shocks shift the expected distribution of GDP growth to the left and deepen its two modes. The expected distribution of inflation is spread out and retains significant probability mass for inflation increases.

Central banking and monetary policy face particular challenges in heterogenous and multilevel currency areas. And yet, most literature on central banking, like most modern central banks themselves, assumes the validity of a unitary monetary authority implementing uniform monetary policy, even in compound polities. Here, I explore the dilemmas of central banking and monetary policy in politically decentralized currency areas by analyzing the origins of the Federal Reserve Act of 1913 and its provisions for a multilevel governance structure and decentralized monetary policy. The origins of the Federal Reserve remain puzzling because its decentralized structure is often dismissed as a failed experiment or a political compromise that nobody truly wanted. However, I find that its design was the product of a deliberate political effort to reimagine central banking in a federal society, and I trace the idea of a decentralized “central” bank to a distinct interpretation of the American political-constitutional tradition.

We investigate the aggregate effects of household debt on a monetary policy easing shock using a smooth transition vector autoregression model. Using generalized impulse response functions, we measure whether the effect of a reduction in interest rate on output is conditioned by different levels of household debt in Australia, Sweden and Norway, three developed economies with high levels of household indebtedness, and in the world’s seven largest economies. Our findings show that the short-term effects of a reduction in interest rates are generally stronger during periods of high household debt. On average, the monetary stimulus (on impact) is 0.06% (percent of GDP) larger in Norway and the United States during periods of high household debt. Our findings also suggest high levels of household debt may diminish the persistence of monetary policy shocks in the medium term (4–8 quarters).

This article examines the cyclical nature of monetisation and demonetisation in Taizhou (台州) during the Song and Yuan dynasties. By analysing local fiscal policies, taxation systems, and economic structures, it reveals a complex process of monetary evolution. The Song Dynasty saw significant fiscal monetization, driven by military needs and implemented through innovative tax systems. However, the Yuan Dynasty witnessed a partial reversal, with a shift towards physical taxation and reduced monetary demands. This research highlights the interplay between central government policies, local fiscal structures, and broader economic trends. It challenges linear models of economic development and emphasises the importance of regional variations in understanding historical monetisation processes.

The balance sheet of the ECB expanded greatly after the Great Crisis of 2007-9, similarly to other core central banks, but this development does not signify the adoption of a new ‘interventionist’ stance. The expansion of the balance sheet by core central banks reflects a profound change in the framework of monetary policy responding to pressures generated during and after the Crisis. In the case of the ECB, however, the expansion also resulted from attempting to cover the cracks of the fragmented European money market to protect the euro. This fragmentation persists and concern about the euro continues to shape ECB policy. The resurgence of inflation since 2022 led the ECB to contract its balance sheet, again similarly to other central banks, making a new framework necessary for monetary policy. But it is not clear what that would be, given the fragmented European money market. The monetary policy of the ECB is in a quandary reflecting the structural deficiencies of the Eurozone.

We examine the response of the exchange rate to monetary policy shocks using structural vector autoregression (SVAR). The SVAR approach in this study differs from previous studies by incorporating uncertainty measures and employing shock-restricted identification constraints. Using structural shocks that are in accordance with the event and external variable constraints, we demonstrate that the US exchange rate appreciates immediately in response to contractionary monetary policy shocks, with the maximum appreciation occurring within one to two months. Our finding highlights the importance of allowing contemporaneous interaction between interest rate and exchange rate, as facilitated by the shock-restricted SVAR, and accounting for uncertainties to address the puzzle of the exchange rate response.