Monetary policy and regional price and wage dispersion in the U.S.

It is generally accepted that certain fiscal policies have strong local impacts. However, it is considerably less obvious that national fiscal and monetary policies will have significantly different impacts on areas as large as states or census regions. This paper focuses on the impact of U.S. monetary policy on relative inflation and wage growth rates for four large regions within the U.S. The results suggest that the conditional variance of aggregate monetary policy shocks, estimated from an ARCH process, increases the dispersion of regional inflation and regional real wage growth rates for the four U.S. census regions.