Document Type
Article
Journal/Book Title/Conference
Economics Research Institute Study Paper
Volume
10
Publisher
Utah State University Department of Economics
Publication Date
2000
Rights
Copyright for this work is held by the author. Transmission or reproduction of materials protected by copyright beyond that allowed by fair use requires the written permission of the copyright owners. Works not in the public domain cannot be commercially exploited without permission of the copyright owner. Responsibility for any use rests exclusively with the user. For more information contact the Institutional Repository Librarian at digitalcommons@usu.edu.
First Page
1
Last Page
29
Abstract
Recent empirical studies reveal that monetary shocks cause persistent fluctuations in inflation and aggregate output. In the literature, few mechanisms have been identified to generate such persistence. In this paper, we propose a new mechanism that does so. Our model features an input-output structure and staggered price contracts. Working through the input-output relations and the timing of firms' pricing decisions, the model generates smaller fluctuations in marginal cost facing firms at later stages than at earlier stages and hence persistent responses of both the inflation rate and aggregate output following a monetary stock. The persistence is larger, the greater the number of production stages. With a sufficient number of stages, the real persistence is arbitrarily large.
Recommended Citation
Huang, Kevin X.D. and Liu, Zheng, "Input-Output Structure and the General Equilibrium Dynamics of Inflation and Output" (2000). Economic Research Institute Study Papers. Paper 186.
https://digitalcommons.usu.edu/eri/186