Monetary Policy,the Composition of GDP and Crisis Duration in Europe |
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| Authors: | Nicolás Cachanosky Andreas Hoffmann |
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| Institution: | 1. Department of Economics, Metropolitan State University of Denver, Denver, CO, USA;2. Institute for Economic Policy, University of Leipzig, Leipzig, Germany |
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| Abstract: | This paper analyzes the effects of changes in interest rates on the composition of production in 10 European countries during the boom period of the 2000s. We find that output elasticity differs across industries and across countries for similar industries. The paper suggests that in the run-up to the 2008 crisis, the European Central Bank's low interest rate policy affected the allocation of resources across industries. This may explain the sluggish overall recovery from the crisis in Europe. |
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| Keywords: | Monetary policy interest rate sensitivity crisis duration GDP composition |
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