Dynamic production networks amplify monetary policy effects, shaping sectoral output.
The article presents a model that shows how changes in the distribution of money demand among households can amplify and spread the effects of monetary policy shocks through production networks. This model helps explain why monetary policy can have a strong impact on the economy, affecting sectors differently over time. The researchers found that the way households choose to spend their money and the connections between different sectors play a crucial role in how monetary policy influences the business cycle. This model offers a new perspective on how monetary policy can affect the economy beyond traditional theories.