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Accounting for inflation dynamic in a fully optimizing macroeconomic framework: evidence from the US states

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Version 2 2024-02-11, 04:54
Version 1 2024-02-04, 10:17
journal contribution
revised on 2024-02-11, 04:52 and posted on 2024-02-11, 04:54 authored by Salaheddine El Omari, Noureddine Benlagha

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

Routledge

Publication 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

Geographic coverage

United States of America (USA)

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