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The Responses of Prices at Different Stages of Production to Monetary Policy Shocks

Todd E. Clark

Received for publication October 30, 1997. Revision accepted for publication July 6, 1998

The Review of Economics and Statistics 1999

This paper examines the responses of prices at different stages of production to monetary policy shocks. In aggregate price analysis, the VAR of Christiano et al. (1996a, 1996b) is used to identify the policy shock as the federal funds rate innovation and trace out the responses of prices. In disaggregate price analysis, the adjustment of prices is examined by comparing inflation before and after a recent policy tightening identified by Romer and Romer (1989, 1992). At early stages of production, a monetary tightening causes input prices to fall more rapidly and by a larger amount than output prices.

DOI
10.1162/003465399558355
Volume
81 (3)
Pages
420-433
Language
en
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BibTeX
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