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Capacity utilization and Monetary Policy

Listed author(s):
  • Pedro Pablo Álvarez Lois

    ()

    (Universidad Carlos III de Madrid)

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    This paper presents a model featuring variable utilization rates across firms due to production inflexibilities and idiosyncratic demand uncertainty. Within a New Keynesian framework, we show how the corresponding bottlenecks and stock-outs generate asymmetries in the transmission mechanism of monetary policy. We derive an expression for the Phillips curve where the dynamics of inflation depend on real marginal costs and on a measure of resource underutilization.

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/03/Fic/dt0306e.pdf
    File Function: First version, May 2003
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    Paper provided by Banco de España & Working Papers Homepage in its series Working Papers with number 0306.

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    Length: 48 pages
    Date of creation: May 2003
    Handle: RePEc:bde:wpaper:0306
    Contact details of provider: Web page: http://www.bde.es/

    Web page: http://www.bde.es/bde/en/secciones/informes/Publicaciones_se/docs/
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