IDEAS home Printed from https://ideas.repec.org/p/usu/wpaper/2000-10.html
   My bibliography  Save this paper

Input-output structure and the general equilibrium dynamics of inflation and output

Author

Listed:
  • Kevin Huang
  • Z. Liu

Abstract

Recent empirical studies reveal that monetary shocks cause persistent fluctuations in inflation and aggregate output. In the literature, few mechanisms have been identified to generate such persistence. In this paper, we propose a new mechanism that does so. Our model features an input-output structure and staggered price contracts. Working through the input-output relations and the timing of firms’ pricing decisions, the model generates smaller fluctuations in marginal cost facing firms at later stages than at earlier stages and hence persistent responses of both the inflation rate and aggregate output following a monetary stock. The persistence is larger, the greater the number of production stages. With a sufficient number of stages, the real persistence is arbitrarily large.

Suggested Citation

  • Kevin Huang & Z. Liu, "undated". "Input-output structure and the general equilibrium dynamics of inflation and output," Working Papers 2000-10, Utah State University, Department of Economics.
  • Handle: RePEc:usu:wpaper:2000-10
    as

    Download full text from publisher

    File URL: ftp://repec.bus.usu.edu/RePEc/usu/pdf/ERI2000-10.pdf
    File Function: First version, 2000
    Download Restriction: no

    More about this item

    Keywords

    Input-output structure; staggered price contracts; persistence; monetary policy;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usu:wpaper:2000-10. See general 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: (John Gilbert). General contact details of provider: http://edirc.repec.org/data/edusuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.