Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267012 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 348
Publisher: 
University of California, Department of Economics, Davis, CA
Abstract: 
I provide evidence of substantial hysteresis (i.e., a situation in which temporary shocks have longrun effects) from monetary shocks on two sources of endogenous growth; human capital and technological adoption. This contribution is the first to test for the presence of this phenomenon in direct measures of the supply-side potential of economies, instead of indirect measures, e.g., TFP. To estimate the effects of exogenous monetary policy shocks, I improve on the the trilemma identification by incorporating a mean-unbiased instrumental variable estimator. Results show substantial hysteresis in both human capital and technological adoption. Importantly, these are found to be asymmetric, as only contractionary shocks result in long lasting responses. I evaluate the aggregate importance of monetary hysteresis with a growth accounting exercise. Across the 17 countries in sample, the accumulated average cost of monetary hysteresis ranges between 1.2 and 9.6% of TFP, for human capital and the adoption of electricity, respectively.
Subjects: 
hysteresis
money non-neutrality
endogenous growth
JEL: 
E01
E30
E32
E44
E47
E51
F33
F42
F44
Document Type: 
Working Paper

Files in This Item:
File
Size
704.69 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.