Accounting for inflation dynamic in a fully optimizing macroeconomic framework: evidence from the US states
This article proposes a New Keynesian DSGE model that can capture the hump-shaped response of inflation to a monetary policy shock that does not depend upon backward-looking elements for the price and wage-setting, such as the indexation of wages or prices. The two additional elements required to achieve a hump-shaped response are roundabout production structure (input–output structure for production) and working capital. Depending on the model’s parameterization, this channel can provide a pronounced response of inflation. In addition, our article provides some reduced-form evidence about the hump-shaped response of inflation using a VAR with Cholesky ordering.
Other Information
Published in: Applied Economics
License: http://creativecommons.org/licenses/by-nc-nd/4.0/
See article on publisher's website: https://dx.doi.org/10.1080/00036846.2023.2169240
Funding
Open Access funding provided by the Qatar National Library.
History
Language
- English
Publisher
RoutledgePublication Year
- 2023
License statement
This Item is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.Institution affiliated with
- Qatar University
- College of Business and Economics - QU