The cost-channel of monetary transmission under positive trend inflation

Irfan Qureshi and Ghufran Ahmad

Economics Letters, 2021, vol. 201, issue C

Abstract: We study the dynamics of the cost-channel of monetary transmission mechanism using a New-Keynesian model with nonzero steady state inflation. We show that the effects of the cost-channel depend almost entirely on the level of trend inflation in the economy. These results are demonstrated analytically and numerically by focusing on the impact of monetary policy shocks on the response of inflation and output.

Keywords: Cost-channel; Trend inflation (search for similar items in EconPapers)
JEL-codes: E12 E31 E32 E52 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:201:y:2021:i:c:s0165176521000793

DOI: 10.1016/j.econlet.2021.109802

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