Reevaluating the Role of Cost-Push and Technology Shocks in a Sticky Price Model

Yongseung Jung

International Economic Journal, 2022, vol. 36, issue 2, 147-157

Abstract: This paper sets up a nominal price rigidity model with catching up with the Joneses to address the relative importance of technology, cost-push, and monetary policy shocks in driving business cycles. This paper shows that the technology shock is the most important source of the post-war U.S. output and inflation variations, and the cost-push shock plays a moderate role in output variations in the model with habit. This finding contrasts with Ireland's results, wherein the cost-push shock explains 80% of output variations in the long run in the sticky price model without habit in consumption.

Date: 2022
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DOI: 10.1080/10168737.2022.2052743

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