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Specific factors meet intermediate inputs: implications for the persistence problem

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Author Info
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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Publisher 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;

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
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

References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alok Johri, 2007. "Delivering Endogenous Inertia in Prices and Output," Department of Economics Working Papers 2007-04, McMaster University. [Downloadable!]
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