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Sticky price models of the business cycle: Can the roundabout production solve the persistence puzzle?

Salaheddine El Omari

Economics Letters, 2017, vol. 160, issue C, 67-72

Abstract: This paper considers the persistence puzzle unveiled by Chari et al. (2000). Our findings show that endogenously persistent output dynamics are not a puzzle for the standard sticky-price model once roundabout production is taken into account. We make this point using a new-Keynesian framework emphasizing an inertial mechanism called the multiplier for price stickiness in the spirit of Basu (1995).

Keywords: Endogenous propagation; Persistence puzzle; Sticky-price model; Roundabout production structure (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:ecolet:v:160:y:2017:i:c:p:67-72