The Cost Channel of Monetary Policy Transmission

Westermeier Andreas
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Westermeier Andreas: Centrum für angewandte Wirtschaftsforschung

South East European Journal of Economics and Business, 2010, vol. 5, issue 1, 19-23

Abstract: In this paper, we develop the new Keynesian Phillips curve augmented by the cost channel of monetary transmission and analyze the central bank's best monetary policy if the central bank is obliged to minimize inflation. It can be shown that a small change of the cost channel's coefficient might lead from a major increase in interest rates to a major decrease in interest rates and vice versa. Even though the optimal interest rate might change dramatically, the inflation response is of only marginal effect.

Keywords: Cost Channel; Monetary Transmission; Monetary Policy; Cost Channel; Monetary Transmission; Monetary Policy (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:5:y:2010:i:1:p:19-23:n:2

DOI: 10.2478/v10033-010-0002-7

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