 Long-term business relationships, bargaining and monetary policyMirko Abbritti, Asier Aguilera-Bravo and Tommaso Trani Economic Modelling, 2021, vol. 101, issue C Abstract: We analyze a monetary economy where firms trading intermediate inputs engage in long-term business-to-business (B2B) relationships. We focus on features such as search for business partners, price negotiation and productivity levels that can make it convenient to separate a relationship. These features are introduced into an otherwise standard New Keynesian (NK) model for policy analysis, where the central bank adopts a Taylor rule. As a result of these features of the B2B relationships, final price and intermediate price inflation are generally not aligned, which is realistic but overlooked by the standard NK model. Consequently, we can investigate the extent to which the allocative role of the intermediate price contributes to the transmission of monetary policy shocks. We find that an allocative role arises from the endogenous separations of the relationships. However, this role is smaller than that in the standard NK model, leading to a comparable but micro-founded alternative explanation of the U.S. business cycle moments. Keywords: Monetary policy; Price bargaining; Product market search; B2B (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:101:y:2021:i:c:s0264999321001401 DOI: 10.1016/j.econmod.2021.105551 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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