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Specific factors meet intermediate inputs: implications for the persistence problem

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  • Kevin Huang

    (Federal Reserve bank of Philadelphia)

Abstract

A central challenge to monetary business cycle theory is to find a solution to the problem of persistence in the real effect of monetary shocks. Previous research has identified separately specific factors and intermediate inputs as two promising mechanisms for generating the persistence in a staggered price-setting framework. By examining a staggered price model that features both specific factors and intermediate inputs, this paper finds an offsetting interaction between the two individually promising mechanisms, which leads to a cancelation of much of the impact of each in propagating monetary shocks. This finding posits a challenge to the search of robust monetary transmission mechanism for solving the persistence problem. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2006.02.002
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 9 (2006)
Issue (Month): 3 (July)
Pages: 483-507

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Handle: RePEc:red:issued:05-16

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Related research

Keywords: Specific factors; Intermediate inputs; Staggered price-setting; Monetary shocks; Persistence;

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References

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Cited by:
  1. David Altig & Lawrence Christiano & Martin Eichenbaum & Jesper Linde, 2005. "Firm-Specific Capital, Nominal Rigidities and the Business Cycle," NBER Working Papers 11034, National Bureau of Economic Research, Inc.
  2. David Altig & Lawrence Christiano & Martin Eichenbaum & Jesper Linde, 2005. "Online Appendix to "Firm-Specific Capital, Nominal Rigidities and the Business Cycle"," Technical Appendices 09-191, Review of Economic Dynamics.
  3. Alok Johri, 2007. "Delivering Endogenous Inertia in Prices and Output," Department of Economics Working Papers 2007-04, McMaster University.

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