Monetary Policy in the Presence of Supply Constraints: Evidence from German Firm-Level DataAlmut Balleer and Marvin Noeller No 10261, CESifo Working Paper Series from CESifo Abstract: Using firm-level survey data from Germany, this paper asks how do supply constraints propagate monetary policy shocks? To answer this question, we first offer a general discussion on the measurement of supply constraints. We show that capacity utilization, a widely accepted measure of bottlenecks and slack, is only an imperfect measure for supply constraints as a whole. Consequently, we distinguish between input and capacity constraints and show that this distinction is crucial to understand the propagation of monetary policy in the presence of supply constraints: the probability to increase prices rises sharply for input constraint firms in response to an expansionary monetary policy shock, independent of their level of capacity utilization. This result challenges a recent literature that argues that capacity utilization is a sufficient statistic to understand the propagation of aggregate shocks in the presence of production limitations. Keywords: supply constraints; capacity utilization; price setting; local projections; monetary policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10261 Access Statistics for this paper More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC. |
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