Real Propagation of Monetary Shocks: Dynamic Complementarities and Capital Utilization

David Cook ()

Macroeconomic Dynamics, 1999, vol. 3, issue 3, 368-383

Abstract: This paper studies the dynamic propagation of a liquidity shock through two real propagation channels: dynamic complementarities and time-varying capital utilization. The findings for an economy with intertemporal externalities are: (1) An otherwise transient liquidity shock will have real effects on output for several years; (2) time-varying capital utilization strongly augments this propagation; (3) the real effects of monetary shocks last longer when external productivity depreciates faster; and (4) nominal prices respond more sluggishly to a change in the money supply when there is a strong real propagation channel.

Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:3:y:1999:i:03:p:368-383_01

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