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Sticky price models of the business cycle: Can the roundabout production solve the persistence puzzle?

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  • El Omari, Salaheddine

Abstract

This paper considers the persistence puzzle unveiled by Chari et al. (2000). Our findings show that endogenously persistent output dynamics are not a puzzle for the standard sticky-price model once roundabout production is taken into account. We make this point using a new-Keynesian framework emphasizing an inertial mechanism called the multiplier for price stickiness in the spirit of Basu (1995).

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  • El Omari, Salaheddine, 2017. "Sticky price models of the business cycle: Can the roundabout production solve the persistence puzzle?," Economics Letters, Elsevier, vol. 160(C), pages 67-72.
    • Handle: RePEc:eee:ecolet:v:160:y:2017:i:c:p:67-72
    DOI: 10.1016/j.econlet.2017.08.028
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    Cited by:

    1. Xiaodong Li & Li Huang & Ai Ren & Qi Li & Xuejin Zeng, 2022. "The Effect of Production Structure Roundaboutness on the Innovation Capability of High-Tech Enterprises—The Mediating Role of Technology Absorption Path," Sustainability, MDPI, vol. 14(9), pages 1-14, April.

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    More about this item

    Keywords

    Endogenous propagation; Persistence puzzle; Sticky-price model; Roundabout production structure;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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