Towards a Micro-Funded Theory of Monetary Policy

Project Lead: Michael Reiter
Team: Leopold Zessner-Spitzenberg
Duration: October 2018 – September 2021
Funding: FWF Project

The project deals with the basic economic mechanisms determining how monetary policy affects the economy, in particular how monetary policy affects private investment. It seems that in reality investment reacts much less to changes in the interest rate than one would expect from theory. We investigate some potential ways to reconcile the theory with the empirical results, in particular we look at frictions in labor markets as well as frictions in financial markets.