Unlocking efficiency: optimal monetary policy when capital misallocation matters
While “misallocation of capital” and its detrimental impact on productivity is traditionally beyond the scope of central banks, monetary policy can influence it through firms’ investment decisions.
- While “misallocation of capital” and its detrimental impact on productivity is traditionally beyond the scope of central banks, monetary policy can influence it through firms’ investment decisions.
- Using a New Keynesian model and granular data on Spanish firms, our results show that expansionary monetary policy reduces capital misallocation.