Other central banks, such as those of Norway, Sweden, and New Zealand, have provided information about the assumed path of policy. In January, the Fed joined them and began releasing information on the underlying policy paths assumed by the participants in their economic projections. These policy paths are summarized in two charts.
In this case, the shock to aggregate demand could be mitigated if domestic producers were able to redirect their output to the markets of their partner states. Hence the initial idiosyncratic shock to one partner state can be absorbed by all partner states within the monetary union, lessening the adverse impact on the partner state which suffered the initial shock.