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

This paper argues that structural shifts in investment have diminished the effectiveness of monetary policy in influencing labor earnings and consumption.

* Examines how changes in investment production and composition weaken monetary policy transmission.
* Documents three key secular changes: declining labor share in investment goods, rising import share, and a shift towards less responsive investment components.
* Utilizes a New Keynesian model to quantify the reduced impact of monetary policy shocks on labor income and consumption.

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

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