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:	2009
Authors:	Henzel, Steffen ; Hülsewig, Oliver ; Mayer, Eric ; Wollmershäuser, Timo
Published in:	Journal of Macroeconomics. - Elsevier, ISSN 0164-0704. - Vol. 31.2009, 2, p. 268-289
Publisher:	Elsevier
Keywords:	Price puzzle New Keynesian model Cost channel Minimum distance estimation

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005022569