Does Monetary Policy Have Differential Regional Effects?

For example, the large declines in crude oil prices in the mid-1980s affected energy-producing regions very differently from energy-consuming regions. Indeed, the notions of a "rolling recovery" and of a "bi-coastal recession" have already entered the business vocabulary and suggest that the timing and perhaps the magnitude of ups and down in economic activity vary across regions. The idea that monetary policy can have varied effects across regions is a short and logical next step. In fact, almost 40 years ago, Walter Isard, founder of the Regional Science Association, stated that "since each of [the nation's] regions has different resource potentials and confronts different obstacles to growth, it follows that monetary policies alone generate both retarding factors for some regions and problem intensifying factors for other regions."

This article appeared in the March/April 1996 edition of Business Review.