Research Seminar: Michael Weber, Ph.D. (University of Chicago, Booth School of Business)

When:05 July 2016
, 16:15
 - 17:30
Where:Room E.01, House of Finance, Campus Westend

Title: "Monetary Policy through Production Networks: Evidence from the Stock Market"

Speaker: Michael Weber, Ph.D. (University of Chicago, Booth School of Business)

Abstract: Monetary policy shocks have a large impact on aggregate stock market returns in narrow event windows around press releases by the Federal Open Market Committee. We use spatial autoregressions to decompose the overall e ffect of monetary policy shocks into a direct (demand) eff ect and an indirect (network) eff ect. We attribute 50%{85% of the overall eff ect to indirect eff ects. The decomposition is robust to di fferent sample periods, event windows, and types of announcements. Direct e ects are larger for industries selling most of the industry output to end-consumers compared to other industries. We fi nd similar evidence of large indirect eff ects using ex-post realized cash- ow fundamentals. A simple model with intermediate inputs guides our empirical methodology. Our findings indicate production networks might be an important propagation mechanism of monetary policy to the real economy.

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