Working Papers

2020-01 | January 2020


The Long-Run Effects of Monetary Policy

Author(s): Òscar Jordà, Sanjay R. Singh, and Alan M. Taylor

Is the effect of monetary policy on the productive capacity of the economy long lived? Yes, in fact we find such impacts are significant and last for over a decade based on: (1) merged data from two new international historical databases; (2) identification of exogenous monetary policy using the macroeconomic trilemma; and (3) improved econometric methods. Notably, the capital stock and total factor productivity (TFP) exhibit hysteresis, but labor does not. Money is non-neutral for a much longer period of time than is customarily assumed. A New Keynesian model with endogenous TFP growth can reconcile all these empirical observations.

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Article Citation

Jordà, Òscar, Sanjay R. Singh, and Alan M. Taylor. 2020. "The Long-Run Effects of Monetary Policy," Federal Reserve Bank of San Francisco Working Paper 2020-01. Available at