Structural Changes in Investment and the Waning Power of Monetary Policy

2026

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Structural Changes in Investment and the Waning Power of Monetary Policy.pdf

1) This paper argues that structural shifts in investment have weakened monetary policy's effectiveness by altering its transmission to labor earnings and consumption.

2) * Analyzes how changes in investment composition and domestic labor content affect monetary policy transmission.
* Develops a two-agent, open-economy New Keynesian model to quantify these effects.
* Demonstrates that a 2020s economy exhibits a significantly weaker response to monetary policy shocks compared to a 1960s economy.

Tags: monetary policy, investment, labor income, consumption, structural change

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