PL EN


2010 | 5 | 1 | 19-23
Article title

The Cost Channel of Monetary Policy Transmission

Title variants
Languages of publication
EN
Abstracts
EN
In this paper, we develop the new Keynesian Phillips curve augmented by the cost channel of monetary transmission and analyze the central bank's best monetary policy if the central bank is obliged to minimize inflation. It can be shown that a small change of the cost channel's coefficient might lead from a major increase in interest rates to a major decrease in interest rates and vice versa. Even though the optimal interest rate might change dramatically, the inflation response is of only marginal effect.
Publisher
Year
Volume
5
Issue
1
Pages
19-23
Physical description
Dates
published
2010-04-01
online
2011-06-07
Contributors
  • Centrum für angewandte Wirtschaftsforschung
References
  • Bart, M. J. und Ramey, V. A. (2001), "The Cost Channel of Monetary Transmission", NBER Macroeconomics Annual 16, 199-240, MIT Press, Cambridge, MA.
  • Bernanke, B. S. und Gertler, M. (1995), "Inside the Black Box: The Credit Channel of Monetary Policy Transmission", The Journal of Economic Perspectives, 9, 27-48.
  • Calvo, G. A. (1983), "Staggered prices in a utility maximizing framework", Journal of Monetary Economics, 12, 383-398.[Crossref]
  • Chowdhury, I.; Hoffmann, M. und Schabert, A. (2006), "Inflation dynamics and the cost of monetary transmission", European Economic Review, 50, 955-1016.
  • Christiano, L. J.; Eichenbaum, M. und Evans, C. L. (1997), "Sticky price and limited participation models of money: a comparison", European Economic Review, 41, 1201-1249.
  • Cogley, T. und Nason, J. M. (1995), "Output Dynamics in Real-Business-Cycle Models", American Economic Review, 85, 492-511.
  • Dedola, L. und Lippi, F. (2005), "The Monetary Transmission Mechanism: Evidence from the Industries of five OECD Countries", European Economic Review, 49, 1543-1569.[Crossref]
  • Gaiotti, E. und Secchi, A. (2004), "Is there a cost channel of monetary policy transmission? An investigation into the pricing behaviour of 2000 firms", Temi di discussione (Economic working paper) 525, Banca d'Italia.
  • Galì, J. und Gertler, M. (1999), "Inflation dynamics: A structural econometric analysis", Journal of Monetary Economics, 44, 195-222.[Crossref][WoS]
  • Galì, J.; Gertler, M. und López-Salido, J. D. (2001), "European Inflation dynamics", European Economic Review, 45, 1237-1270.[Crossref]
  • Hicks, J. R. (1979), "Is Interest the Price of a Factor of Production?", In Time, Uncertainty and Disequilibrium, edited by M. J. Rizzo, 51-63, D. C. Heath and Co., Lexington, MA.
  • Holman, J. A. (1998), "GMM Estimation of a Money-in-the-Utility-Function Model: The Implication of Functional Forms", Journal of Money, Credit and Banking, 30, 679-698.[Crossref]
  • Kaufmann, S. und Scharler, J. (2005), "Financial Systems and the Cost Channel Transmission of Monetary Policy Shocks", Working Paper 116, OeNB.
  • McCallum, B. T. und Nelson, E. (1999), "An Optimizing IS-LM-Specification for Monetary Policy and Business Cycle Analysis", Journal of Money, Credit and Banking, 21, 296-316.[Crossref]
  • Parker, J. A. (2006), "Euler Equations", unpublished working paper, Princeton University.
  • Rabanal, P. (2003), "The Cost Channel of Monetary Policy: Further Evidence for the United States and the Euro area", IMF Working Paper 03/149, IMF.
  • Ravenna, F. und Walsh, C. E. (2006), "Optimal monetary policy with the cost channel", Journal of Monetary Economics, 53, 199-216.
  • Roberts, J. M. (1995), "New Keynesian Economics and the Phillips Curve", Journal of Money, Credit and Banking, 27, 975-984.[Crossref][WoS]
  • Surico, P. (2008), "The Cost Channel of Monetary Policy and Indeterminacy", Macroeconomic Dynamics, 12, 724-735.[WoS][Crossref]
  • Tillmann, P. (2008), "Do interest rates drive inflation dynamics? An analysis of the cost channel of monetary transmission", Journal of Economic Dynamics and Control, 32, 2723-2744.[WoS][Crossref]
  • Tillmann, P. (2009), "Optimal Monetary Policy with an Uncertain Cost Channel", Journal of Money, Credit and Banking, 41, 885-906.[WoS]
  • Walsh, C. E. (2003), Monetary Theory and Policy, 2. Auflage, MIT Press, Cambridge, MA.
  • Woodford, M. (2003), Interest and Prices: Foundations of a Theory of Monetary Policy, Princeton University Press, Princeton, NJ.
Document Type
Publication order reference
Identifiers
YADDA identifier
bwmeta1.element.doi-10_2478_v10033-010-0002-7
JavaScript is turned off in your web browser. Turn it on to take full advantage of this site, then refresh the page.