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Is there a persistence problem? Part I: maybe

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  • Evan F. Koenig

Abstract

Empirical studies suggest that monetary policy shocks can have a sustained impact on aggregate output. How is it possible for nominal shocks to have persistent real effects? One popular explanation centers on overlapping price contracts. However, recent theoretical work has cast doubt on the price-contract story. It turns out to be extremely difficult to obtain long-lasting output effects from policy shocks in a world with staggered price setting, except under unrealistic assumptions about household tastes.

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  • Evan F. Koenig, 1999. "Is there a persistence problem? Part I: maybe," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 10-15.
    • Handle: RePEc:fip:fedder:y:1999:i:qiv:p:10-15
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    1. Evan F. Koenig, 2000. "Is there a persistence problem? Part 2: Maybe not," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 11-19.

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