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A New Cost Channel of Monetary Policy

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  • M. Alper Cenesiz

    (Saarland University, University of Kiel)

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    Abstract

    In this paper, I developed a new cost channel of monetary policy transmission in a small scale, dynamic, general equilibrium model. The new cost channel of monetary policy transmission implies that the frequency of price adjustment increases in the nominal interest rate. I found that allowing for the new cost channel can account both for the muted and delayed inflation response and for the persistence of the output response to monetary policy shocks. Without any additional assumption, my model can also generate the delayed output response, though for a slightly more competitive goods market calibration

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    Bibliographic Info

    Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 68.

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    Date of creation: 02 Feb 2007
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    Handle: RePEc:mmf:mmfc06:68

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    Web page: http://www.essex.ac.uk/afm/mmf/index.html

    Related research

    Keywords: Price stickiness; Monetary policy; Price adjustment; Persistence;

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