Monetary Policy Shocks and Input–Output Characteristics of Production Networks

Abstract

This paper revisits the production network’s role in transmitting monetary policy shocks. The study uses macroeconomic data for multiple OECD economies, for which it estimates the time-varying impulse response functions of GDP to monetary shocks. In contrast to recent macroeconomics papers focusing on upstreamness or downstreamness, the paper studies measures from the input–output literature, like average propagation length or fields of influence. When looking at the relationship between the production network measures and the impact of monetary policy shocks on GDP, measures like average propagation length or rows’ fields of influence, amplify the negative impact of the monetary policy shocks, while the forward linkage dampens them.