Monetary Policy Shocks and Aggregate Supply--论文代写范文精选

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Abstract
During the past six years of slow economic growth, economists and policymakers have expressed repeated concern that the financial crisis and recession of 2007-09 may have harmed the U.S. economy’s productive capacity. Workers’ participation in the labor force declined in the recovery, and growth in labor productivity slowed from its historical trend. The disappointing performance of these and other supply-side indicators has led economists to revise down their estimates of the economy’s potential output (CBO; Ball; Hall). A sustained period of weak demand may have caused supply-side damage, eroding the economy’s productive capacity through various channels. 

Many workers may have lost skills due to long spells of unemployment or labor force nonparticipation, and the business sector may have held back on capital formation, business formation, and innovation. Traditionally, monetary policy is assumed to stabilize economic activity and inflation without affecting the economy’s productive capacity—that is, its potential output. However, if weak demand erodes capacity, then monetary policy may be able to expand capacity by stimulating economic activity. Accommodative monetary policy raises demand for goods and services, thus promoting investment and labor market activity and improving the climate for innovation and new business startups. Indeed, recent remarks by policymakers recognize that supply-side damage could be reversible (Yellen; Powell).

However, as concerns about supply-side damage have only recently gained prominence in monetary policy discussions, there is scant literature on monetary policy’s supply-side effects. To help fill this gap, this article examines whether monetary policy has long-lasting effects on labor productivity and potential output. The empirical analysis suggests that historically, labor productivity temporarily increases following a surprise expansion of monetary policy, with no longer-term effects. 

This increase can be explained by firms’ more intense use of available production factors. As firms cannot operate their production factors above the normal capacity rate indefinitely, surprise deviations of the stance of monetary policy from its systematic behavior do not significantly raise trend labor productivity, which is associated with increases in potential output. In the current recovery, in which the effective federal funds rate has been constrained by the zero lower bound, the Federal Reserve has turned to unconventional tools to provide additional monetary policy accommodation. 

These unconventional tools were successful in keeping the level of accommodation aligned with monetary policy’s systematic historical behavior. As a result, recent policy surprises have had only a modest influence on labor productivity. However, had the Federal Reserve not employed its unconventional policies, the stance of monetary policy would have been tighter, dampening output and labor productivity. In this way, the additional accommodation provided by unconventional monetary policy tools appears to have boosted output and labor productivity substantially. Section I shows that various supply-side indicators are positively correlated with the business cycle. Section II provides empirical evidence of the dynamic responses of labor productivity and its key determinants to a monetary policy shock. 
examines the possible influence of monetary policy actions on labor productivity during the current recovery. 

Supply-Side Factors in the Business Cycle 
Multiple measures of the economy’s productive capacity move in tandem with the business cycle. These fluctuations suggest it may be possible for monetary policy to influence the economy’s supply side by stimulating economic expansion. To analyze the business cycle in macroeconomic time series, it is customary to remove low-frequency variation in the data using the time series’ statistical trend. While the possible supply-side effects of fluctuations in demand blur the conceptual distinction between trend and cycle, this conventional approach to business cycle analysis remains useful. 

The business cycle is characterized by the joint movement of many macroeconomic variables. When cyclical output increases, other variables such as hours worked tend to rise; when cyclical output declines, the opposite is typically true. Therefore, cyclical fluctuations in indicators of the economy’s productive capacity suggest business cycles can have long-lasting supply-side effects. For example, during an economic upswing, a cyclical rise in research and development spending or new business formation could leave the economy’s productive capacity persistently higher. Labor productivity fluctuates over the business cycle. Chart 1 shows the cyclical component of output per hour, obtained by removing a smoothed trend—the Hodrick-Prescott (HP) filter with a smoothing parameter of 1,600—along with the recession periods defined by the National Bureau of Economic Research (NBER). 

Labor productivity tends to fall below trend during recessions and rise above trend during expansions. In the expansions of the 1990s and 2000s, labor productivity peaked early on and slowed in the later stages. Likewise, labor productivity surged in the aftermath of the 2007-09 recession but has slowed in recent years.1 The cyclical nature of labor productivity can be summarized by its correlation with output. Table 1 shows that cyclical labor productivity is positively correlated with cyclical output (a correlation coefficient of 0.38), while the correlation between the growth rates of labor productivity and output is larger (0.67). While the cyclicality of labor productivity is well established, a less documented idea is that economic downturns could cause lasting supply-side damage by lowering trend labor productivity. 

Reifschneider, Wascher, and Wilcox show that potential output has declined since the onset of the last recession and attribute the decline largely to lower trend labor productivity.2 Labor productivity increased at an average annual rate of 1.3 percent in the recovery period from 2009:Q3 to 2014:Q4, below the average growth rate in the pre-recession period from 2003:Q4 to 2007:Q4 (1.8 percent).3 To assess how a recession may affect trend labor productivity, it is useful to first analyze its effect on individual sources of labor productivity. Fernald (2014) identifies three major sources of variations in quarterly labor productivity: available factor inputs per hour worked, the intensity with which firms use available capital and labor, and total factor productivity, a residual component that captures the productivity-enhancing effects of various unmeasured factors.4 Each of these sources has its own implications for trend labor productivity.

Factor inputs per hour of work Labor productivity can shift depending on the supply of capital and labor available per hour worked. For example, subdued investment reduces growth in the capital stock and thus growth in available capital per hour worked, slowing what is called capital deepening. 

A more skilled workforce, on the other hand, increases the labor input per hour worked, known as labor quality, thus raising labor productivity. Capital deepening and improvements in labor quality are similar insofar as the former changes the available physical capital per hour worked and the latter changes the available human capital per hour worked. As changes in the capital stock (physical or human) are long-lasting, they likely affect trend labor productivity. However, in an economic downturn, factor inputs per hour could increase if hours worked decline sharply and the capital stock or labor quality is slow to adjust. An increase in labor productivity due to a drop in hours worked would not indicate an improvement in trend labor productivity. Chart 2 shows factor inputs per hour—that is, capital per hour and labor quality—as percent deviations from the HP trend.5 Factor inputs per hour typically increase during recessions and decline during expansions. Consistent with this pattern, the series of factor inputs per hour is highly negatively correlated with output (see Table 1). 

The countercyclical pattern reflects how hours worked fall in recessions and rise in expansions in the face of slowly adjusting capital and labor quality. The pattern indicates that, on their own, fluctuations in available capital and labor quality have little influence on cyclical labor productivity. Therefore, cyclical fluctuations in labor productivity that derive from this source would not necessarily point to supply-side effects. Factor use Firms can influence labor productivity in an economic downturn by altering the intensity with which they use available capital and labor. When output demand is low, firms may use their available production factors less intensively. For example, firms can reduce capital utilization by idling machines. Even with this reduced production level, adjustment costs such as hiring and firing costs can encourage firms to “hoard” labor by keeping more workers employed than necessary. In such a scenario, workers’ effort falls, and their output declines more than their hours worked, thus reducing the output produced per hour. 

A decomposition of labor productivity must account for the less intensive use of available production factors to avoid measuring them as lower total factor productivity. However, this source of variation in labor productivity reflects cyclical fluctuations in demand and does not affect trend labor productivity, as firms cannot permanently operate labor and capital above their normal capacity rate. Chart 3 shows that factor use declines during recessions and rises during expansions, consistent with the idea of labor hoarding and a varying workweek of capital.6

Total factor productivity 
Labor productivity can also shift due to changes in total factor productivity (TFP). Just as labor productivity measures the efficiency of an hour of labor in producing output, TFP measures the efficiency of all measured inputs—hours worked, capital, and labor quality—combined. This measure will depend on the level of available production technologies and the government regulations that apply to them, among other influences. In an economic downturn, for example, innovation may decline as a result of reduced spending on research and development and fewer new business startups, which could be restrained by inadequate financing or increased uncertainty about future macroeconomic conditions. 

Innovation leads to better production technologies, and a temporary decline in innovation could thereby reduce the level of TFP relative to its trend. A persistent decline in TFP could point to flattening trend labor productivity. Chart 4 displays the percent deviations of TFP from the HP trend. TFP tends to fall below trend during recessions and rise above trend during expansions. However, the pattern is not quite as pronounced as for labor productivity; for example, the decline in TFP was smaller than the decline in labor productivity during the recessions of 1990-91 and 2001. To the extent variations in TFP reflect the ebb and flow of technological progress, they may suggest cyclical fluctuations in labor productivity have long-lasting, supply-side effects.

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