The responses of prices at different stages of production to monetary policy shocks
AbstractThis paper examines the responses of prices at different stages of production to an explicitly identified demand shock: a monetary policy shock. The frameworks of Christiano, Eichenbaum, and Evans (1994, 1996) and Sims and Zha (1995b) are used to identify the policy shock as the innovation to the federal funds rate in a VAR. The adjustment of prices at different stages of production is examined by adding three different sets of prices to the basic VAR model: (a) the PPIs for crude materials, intermediate goods, and finished goods; (b) the newer industry-based PPIs of input and output prices for crude, primary, semifinished, finished, and final goods processors; and (c) the input and output price indexes for manufacturing industries constructed by Roberts, Stockton, and Struckmeyer (1994). The analysis shows that, at earlier stages of production, a monetary tightening causes input prices to fall more rapidly and by a larger amount than output prices. This finding would appear to be consistent with a model in which all price changes are subject to menu costs but some chain structure in production gives rise to prices at earlier stages of production moving more than prices at later stages.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Federal Reserve Bank of Kansas City in its series Research Working Paper with number 96-12.
Date of creation: 1996
Date of revision:
Other versions of this item:
- Todd E. Clark, 1999. "The Responses Of Prices At Different Stages Of Production To Monetary Policy Shocks," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 420-433, August.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lu Dayrit).
If references are entirely missing, you can add them using this form.