The Price Puzzle Revisited: Can the Cost Channel explain a Rise in Inflation after a Monetary 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:	2006
Authors:	Mayer, Eric ; Hülsewig, Oliver ; Henzel, Steffen ; Wollmershäuser, Timo
Publisher:	Würzburg : University of Würzburg, Department of Economics
Subject:	Transmissionsmechanismus \| Inflation \| Geldpolitik \| Schock \| Ungleichgewichtstheorie \| Theorie \| Schätzung \| EU-Staaten \| Price puzzle \| New Keynesian model \| cost channel \| minimum distance estimation

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Series:	W.E.P. - Würzburg Economic Papers ; 74
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	543511154 [GVK] hdl:10419/22367 [Handle] RePEc:zbw:wuewep:74 [RePEc]
Classification:	E32 - Business Fluctuations; Cycles ; C51 - Model Construction and Estimation ; E31 - Price Level; Inflation; Deflation
Source:	EconStor

Persistent link: https://www.econbiz.de/10010296551