Back to basics: sticky prices in the monetary transmission mechanism
I use the measures of frequency of price adjustment in Nakamura and Steinsson (2008) to show that stickier price industries have higher levels of output response to monetary policy shocks. Using a Vector Auto-regression model, I build different measures of response to a monetary policy shock of 14 U...
- Autores:
-
Roux Uribe, Nicolás de
- Tipo de recurso:
- Work document
- Fecha de publicación:
- 2011
- Institución:
- Universidad de los Andes
- Repositorio:
- Séneca: repositorio Uniandes
- Idioma:
- eng
- OAI Identifier:
- oai:repositorio.uniandes.edu.co:1992/8286
- Acceso en línea:
- http://hdl.handle.net/1992/8286
- Palabra clave:
- Monetary transmission mechanism
Interest rate
Sticky prices
Financial frictions
Política monetaria - Investigaciones
Precios - Investigaciones
E31, E40, E52
- Rights
- openAccess
- License
- http://creativecommons.org/licenses/by-nc-nd/4.0/
| Summary: | I use the measures of frequency of price adjustment in Nakamura and Steinsson (2008) to show that stickier price industries have higher levels of output response to monetary policy shocks. Using a Vector Auto-regression model, I build different measures of response to a monetary policy shock of 14 US industries. These measures are shown to be related to the level of price rigidity. More precisely, I find that if firms within an industry change prices twice as often as firms in another industry, output deviation from trend in response to a negative shock of 25 basis points will be 69 percentage points smaller in the less sticky industry. This result is stronger when I account for measurement error in the level of response. |
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