It seems to be a US vs Euro blogposts day. I covered a paper from Fernando Nechio which looked at one size fit monetary policy for Europe. The paper divided the EMU countries into EMU-core and EMU-periphery and showed how ECB’s one size fit policy was tight for EMU-periphery.
In a new paper Fernando Nechio along with Israel Malkin look at US this time. Just like Europe, US is made of different states/regions and it is a strong chance that some are doing better than the rest. But Fed makes policy for the country as a whole. So, are there problems just like we see in Europe??
In this paper, instead of looking at 50 states, authors divided US into four regions and calculate the Taylor rule for the five regions.