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Monetary Policy, Distribution and Autonomous Demand in the US

Author

Listed:
  • Maria Cristina Barbieri Goes

    (University of Bari Aldo Moro, Italy)

  • Joana David Avritzer

    (Economics Department, Connecticut College, USA)

Abstract

In this paper we explore the empirical implications of considering monetary and distribution shocks on semi-autonomous demand under a supermultiplier framework. In particular, we investigate the effect of changes in financial variables - the federal funds rate - and distributive variables - the wage share of income - on autonomous expenditure (e.g.: private residential investment and consumer credit), as well as economic growth. We use quarterly data for the United States economy from 1968 to 2022 and apply a SVAR model. We find that: (i) the federal funds rate, our financial variable, has a negative and statistically significant effect on autonomous expenditure, whether we define it to be given by residential investment added to consumer credit or to durable goods consumption; (ii) a positive shock in the wage share does seem to have a positive and significant effect on consumption and output, however, this effect is measured to be transitory; (iii) a positive shock in aggregated autonomous demand has a positive, persistent, and statistically significant effect on induced consumption and, output, as well as on the adjusted wage share; (iv) a positive shock in private residential investment has a positive, persistent and statistically significant effect on other autonomous components of demand and output; (v) while residential investment positively influences consumer credit, the inverse does not hold.

Suggested Citation

  • Maria Cristina Barbieri Goes & Joana David Avritzer, 2023. "Monetary Policy, Distribution and Autonomous Demand in the US," Working Papers 2307, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:2307
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    References listed on IDEAS

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    More about this item

    Keywords

    Supermultiplier; financial and distributional shocks; SVAR; US; semi-autonomous expenditure;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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