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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...
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find that up to 70% (50%) of the cross-country asymmetries in the responses of output (prices) to a monetary policy shock …-country asymmetries in monetary transmission. To do so, I determine how closely the impulse responses to a monetary policy shock obtained … in the short run asymmetries in the output responses arise mainly due to cross-country differences in industry mix, in …
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