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Real Propagation of Monetary Shocks: Dynamic Complementarities and Capital Utilization

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  • Cook, David

Abstract

This paper studies the dynamic propagation of a liquidity shockthrough two real propagation channels: dynamiccomplementarities and time-varying capitalutilization. The findings for an economywith intertemporal externalities are: (1) An otherwise transient liquidityshock will have real effects on output for several years; (2) time-varyingcapital utilization strongly augments this propagation; (3) the realeffects of monetary shocks last longer when external productivitydepreciates faster; and (4) nominal prices respond more sluggishly to achange in the money supply when there isa strong real propagation channel.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Macroeconomic Dynamics.

Volume (Year): 3 (1999)
Issue (Month): 03 (September)
Pages: 368-383

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Handle: RePEc:cup:macdyn:v:3:y:1999:i:03:p:368-383_01

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Cited by:
  1. Jens Larsen & Katharine Neiss & Fergal Shortall, 2002. "Factor utilisation and productivity estimates for the United Kingdom," Bank of England working papers 162, Bank of England.
  2. Katharine S. Neiss & Evi Pappa, 2005. "Persistence without too much price stickiness: the role of variable factor utilization," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 231-255, January.
  3. Alok Johri, 2009. "Delivering Endogenous Inertia in Prices and Output," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(4), pages 736-754, October.
  4. Pedro P. Alvarez-Lois, 2005. "Production Inflexibilities and the Cost Channel of Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 170-193, January.
  5. Alok Johri, 2005. "Learning-by-doing and Endogenous Price-level Inertia," Department of Economics Working Papers 2005-02, McMaster University.

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