DP18022 Short and Variable Lags

• Gergely Buda Vasco Carvalho Giancarlo Corsetti Joao B. Duarte Stephen Hansen Afonso S. Moura Alvaro Ortiz Tomasa Rodrigo José V Rodríguez Mora Guilherme A. Silva
25 Mar 2023

We study the transmission of monetary policy shocks using daily consumption, corporate sales and employment series. We find that the economy responds at both short and long lags that are variable in economically significant ways. Consumption reacts in one week, reaches a local trough in one quarter, recovers, and declines again after three quarters. Sales follow a similar pattern, but the initial drop, while delayed (one month), is deeper. In contrast, employment falls monotonically for five quarters albeit with a smaller impact reaction. We show that these short lags are masked by time aggregation at lower —quarterly— frequencies