Industry Heterogeneity, Production Network and Monetary Policy
Time：4:00pm - 5:30pm, Apr 19, 2019
Venue：Room 359S, Overseas Exchange Center, Peking University
(Department of Economics and Finance, City University of Hong Kong)
How does monetary policy affect prices? This is the central issue for money non-neutrality, and has been studied extensively in aggregate level. Our paper provides the first study on how prices transmit through input-output linkages in industry level, and how industry specific characteristics affect the transmission. First, we provide a complete set of industry level output, price and wage responses to monetary shocks, with rich cross-industry heterogeneities. In particular, we find a puzzling negative correlation between labor share and price response, which seems to be contradictory to the cost driven channel of inflation in most New Keynesian models. Second, we estimate a simple model of production network with industry heterogeneities in input and output linkage, labor intensity, price rigidity and wage rigidity. The model partially captures the puzzling negative correlation. Third, we decompose the transmission of prices into a direct channel of labor cost, and an indirect channel of intermediate input cost. We also show how cross-industry heterogeneities affect this decomposition. The unexplained fraction of wage and price heterogeneities calls for richer models that allow for industry specific decreasing returns to scale. Forth, we shut down each dimension of the heterogeneities one by one to quantify its aggregate implications for money non-neutrality.
Dr. Zhesheng Qiu is an assistant professor at the department of economics and finance, City University of Hong Kong. He is a macroeconomist specialized in business cycle and monetary policy related research topics. His current research focuses on the roles of systematic expectations biases, cross-sectional heterogeneities, and non-Walrasian market structure. He is also more broadly interested in collateralized contract, Chinese housing market, and redistributional policies. He has published several papers in top journals, including Annuals of Economics and Finance, and Economic Research Journal. He received his Ph.D. degree of Economics in University of Pennsylvania, advised by José-Víctor Ríos-Rull.