Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278221 
Year of Publication: 
2022
Series/Report no.: 
ECB Working Paper No. 2746
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
Using regionally disaggregated data on economic activity, we show that risk sharing plays a key role in shaping the real effects of monetary policy. With weak risk sharing, monetary policy shocks trigger a strong and durable response in output. With strong risk sharing, the response is attenuated, and output reverts to its initial level over the medium term. The attenuating impact of risk sharing via credit and factor markets concentrates over a two-year horizon, whereas fiscal risk sharing operates over longer horizons. Fiscal risk sharing especially benefits poorer regions by shielding them against persistent output contractions after tightening shocks.
Subjects: 
Monetary Policy
Risk Sharing
Regional Heterogeneity
Local Projections
Quantile Regressions
JEL: 
C32
E32
E52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-5394-8
Document Type: 
Working Paper

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