Local Heterogeneity of Monetary Policy

Abstract

In this article, I will investigate the role of regional heterogeneity of monetary policy. This will be investigated through state-level data while modeling the Federal Reserve as a common central bank for each state in a Bayesian global vector autoregressive model with stochastic volatility. Specifying the Federal Reserve as a common central bank will allow for examining cross-state asymmetries through a joint monetary policy shock to all states simultaneously.