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

By Steffen R. Henzel, Oliver Hülsewig, Eric Mayer, T. Wollmershaeuser. Social Science Research Network, 2009

154 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/c449c0d6324204a99240fd3cc300d45b0e8597a5