The price puzzle revisited: Can the cost channel explain a rise in inflation after a monetary policy shock?
This paper explores whether the cost channel solves the price puzzle. We set-up a New Keynesian DSGE model and estimate it for the euro area by adopting a minimum distance approach. Our findings suggest that - under certain parameter restrictions which are not rejected by the data - the cost channel helps to generate an initial rise of inflation after a monetary contraction.
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|Date of creation:||2009|
|Date of revision:|
|Publication status:||Published in Journal of Macroeconomics 2 31(2009): pp. 268-289|
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Web page: http://www.vwl.uni-muenchen.de
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