Spain | The Short Lags of Monetary Policy

Summary

This Working Paper examines the transmission of monetary policy shocks to the macroeconomy at high frequency. To do this, daily consumption and investment aggregates are constructed using bank transaction records and administrative data to measure daily gross output and employment in Spain.

Key points

• Key points:
• It is shown that variables typically regarded as "slow-moving", such as consumption and output, respond significantly within weeks. In contrast, the responses of aggregate employment and consumer prices are slow and peak at long lags.
• Disaggregating by sector, consumption category and supply-chain distance to final demand, it is found that fast adjustment is led by downstream sectors tied to final consumption—in particular luxuries and durables—and that the response of upstream sectors is slower but more persistent.
• It is found that time aggregation to quarterly frequency alters the identification of monetary policy transmission, shifting significant responses to longer lags, whereas weekly or monthly aggregation preserves daily-frequency results.

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