esting the Structural Interpretation of the Price Puzzle with a Cost-Channel Model

• Autores: Efrem Castelnuovo
• Localización: Oxford bulletin of economics and statistics, ISSN 0305-9049, Vol. 74, Nº. 3, 2012, págs. 425-452
• Idioma: inglés
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• Resumen

  • We estimate a variety of small-scale new-Keynesian DSGE models with the cost channel to assess their ability to replicate the ‘price puzzle’, i.e. the inflationary impact of a monetary policy shock typically arising in vector autoregression (VAR) analysis. To correctly identify the monetary policy shock, we distinguish between a standard policy rate shifter and a shock to ‘trend inflation’, i.e. the time-varying inflation target set by the Fed. Our estimated models predict a negative inflation reaction to a monetary policy tightening. We offer a discussion of the possible sources of mismatch between the VAR evidence and our own.