TY  - JOUR
AU  - Raddatz,Claudio
AU  - Rigobon,Roberto
TI  - Monetary Policy and Sectoral Shocks: Did the FED react properly to the High-Tech Crisis?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9835
PY  - 2003
Y2  - July 2003
UR  - http://www.nber.org/papers/w9835
L1  - http://www.nber.org/papers/w9835.pdf
N1  - Author contact info:
Claudio Raddatz
Research Economist
World Bank, MSN3-301
1818 H Street, N.W.
Washington, DC 20433
Tel: 202/458-2145
E-Mail: craddatz@bcentral.cl

Roberto Rigobon
MIT Sloan School of Management
100 Main Street, E62-516
Cambridge, MA 02142
Tel: 617/258-8374
Fax: 617/258-6855
E-Mail: rigobon@mit.edu
AB  - This paper presents an identification strategy that allows us to study both the sectoral effects of monetary policy and the role that monetary policy plays in the transmission of sectoral shocks. We apply our methodology to the case of the U.S. and find some significant differences in the sectorial responses to monetary policy. We also find that monetary policy is a significant source of sectoral transfers. In particular, a shock to Equipment and Software investment, which we naturally identify with the High-tech crises, induces a response by the monetary authority that generates a temporary boom in Residential Investment and Durable Consumption but has almost no effect on the high-tech sector. Finally, we perform an exercise evaluating what the model predicts regarding the automatic and a more aggressive monetary policy response to a shock similar to the one that hit the U.S. in early 2001. We find that the actual drop in interest rates we have observed is in line with the predictions of the model.
ER  -