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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Year of publication:	2007
Authors:	Henzel, Steffen ; Hülsewig, Oliver ; Mayer, Eric ; Wollmershäuser, Timo
Institutions:	CESifo
Subject:	price puzzle \| New Keynesian model \| cost channel \| minimum distance estimation

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Extent:	application/pdf
Series:	CESifo Working Paper Series.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 2039
Classification:	C51 - Model Construction and Estimation ; E31 - Price Level; Inflation; Deflation ; E32 - Business Fluctuations; Cycles
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005094397