2001) On the transmission of monetary policy shocks
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BibTeX
@MISC{Huang_2001)on,
author = {Kevin X. D. Huang and Zheng Liu and Louis Phaneuf and Fabio Schiantarelli and Shouyong Shi and Frank Smets and Jonathan Willis and Seminar Participants},
title = {2001) On the transmission of monetary policy shocks},
year = {}
}
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Abstract
2001 Midwest Macro Meeting, and the 2001 SED Annual Meeting for helpful comments. Phaneuf acknowledges financial support from SSHRC and FCAR. The usual disclaimer Empirical studies reveal that monetary policy shocks generate long-lasting effects on real GDP, countercyclical real wages before World War II and procyclical real wages afterwards. In this paper, we construct a dynamic general equilibrium model to explain the observed output persistence and the evolving nature of real wage cyclicality. The model features three important rigidities: staggered price-setting, staggered wage-setting, and an input-output structure. We show that, while no subset of the model with fewer ingredients can produce both the desired patterns of real wage dynamics and persistent movements in aggregate output, the model with all three features successfully accounts for these empirical regularities. In particular,
