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Pricing Behaviour and the Cost-Push Channel of Monetary Policy

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  • Gilberto Tadeu Lima
  • Mark Setterfield

Abstract

This paper examines the empirical and theoretical status of the cost-push channel of monetary policy, according to which interest rates affect the costs of production and hence pricing behaviour. Particular attention is paid to modelling the cost-push channel in a manner consistent with cost-plus pricing theory, which is identified as the canonical model of pricing behaviour in heterodox economics. It is shown that different variants of cost-plus pricing behaviour give rise to qualitatively different specifications of the cost-push channel, with important consequences for macrodynamics and the conduct of monetary policy.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09538250903391863
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Review of Political Economy.

Volume (Year): 22 (2010)
Issue (Month): 1 ()
Pages: 19-40

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Handle: RePEc:taf:revpoe:v:22:y:2010:i:1:p:19-40

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Web page: http://www.tandfonline.com/CRPE20

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Web: http://www.tandfonline.com/pricing/journal/CRPE20

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Cited by:
  1. Porcile, Gabriel & de Souza, Alexandre Gomes & Viana, Ricardo, 2011. "External debt sustainability and policy rules in a small globalized economy," Structural Change and Economic Dynamics, Elsevier, vol. 22(3), pages 269-276, September.
  2. Guglielmo Forges Davanzati & Andrea Pacella, 2014. "Unemployment benefits, the ‘added worker effect’ and income distribution in a monetary economy," Working Papers PKWP1402, Post Keynesian Economics Study Group (PKSG).
  3. Mark Setterfield, 2013. "Using Interest Rates as the Instrument of Monetary Policy: Beware Real effects, Positive Feedbacks, and Discontinuities," Working Papers 1320, Trinity College, Department of Economics.
  4. Eckhard Hein, 2009. "A (Post-) Keynesian perspective on "financialisation"," IMK Studies 01-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  5. Forges Davanzati, Guglielmo & Pacella, Andrea, 2013. "The profits-investments puzzle: A Post Keynesian-Institutional interpretation," Structural Change and Economic Dynamics, Elsevier, vol. 26(C), pages 1-13.

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