Endogenous Money or Sticky Price? Comment on Monetary Non-neutrality and Inflation Dynamics

Pengfei Wang and Yi Wen

Working Papers from Cornell University, Center for Analytic Economics

Abstract: In this paper we show that the highly persistent inflation dynamics and its lead-lag relationship with output can be explained by a standard flexible price RBC model augmented with endogenous monetary policy. Endogenous monetary policy acting upon the illusion that price is sticky and money is effective can create price movements that appear to indicate price stickiness, although there is none in the economy.

JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2004-05
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https://cae.economics.cornell.edu/04-08.pdf

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Journal Article: Endogenous money or sticky prices?--comment on monetary non-neutrality and inflation dynamics (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:corcae:04-08

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