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The Price Puzzle Revisited: Can the Cost Channel Explain a Rise in Inflation after a Monetary Policy Shock?

Steffen Henzel, Oliver Hülsewig, Eric Mayer () and Timo Wollmershäuser ()

No 2039, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper explores whether the cost channel solves the price puzzle. We set-up a New Keynesian DSGE model and estimate it for the euro area by adopting a minimum distance approach. Our findings suggest that - under certain parameter restrictions which are not rejected by the data - the cost channel helps to generate an initial rise of inflation after a monetary contraction.

Keywords: price puzzle; New Keynesian model; cost channel; minimum distance estimation (search for similar items in EconPapers)
JEL-codes: C51 E31 E32 (search for similar items in EconPapers)
Date: 2007
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https://www.cesifo-group.de/DocDL/cesifo1_wp2039.pdf (application/pdf)

Related works:
Journal Article: The price puzzle revisited: Can the cost channel explain a rise in inflation after a monetary policy shock? (2009) Downloads
Working Paper: The price puzzle revisited: Can the cost channel explain a rise in inflation after a monetary policy shock? (2009)
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