Others Short- and Long-Run Tradeoff Monetary Easing

Oikawa, Koki  ,  Ueda, Kozo

0762015-11 , UTokyo Price Project , Waseda University , School of Political Science and Economics, Waseda University , Centre for Applied Macroeconomic Analysis (CAMA)
Description
2012~2016年度科学研究費補助金[基盤研究(S)]「長期デフレの解明」(研究代表者 東京大学経済学研究科・渡辺努, 課題番号:24223003)
In this study, we illustrate a tradeoff between the short-run positive and long-run negative effects of monetary easing by using a dynamic stochastic general equilibrium model embedding endogenous growth with creative destruction and sticky prices due to menu costs. While a monetary easing shock increases the level of consumption because of price stickiness, it lowers the frequency of creative destruction (i.e., product substitution) because inflation reduces the reward for innovation via menu cost payments. The model calibrated to the U.S. economy suggests that the adverse effect dominates in the long run.
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http://repository.dl.itc.u-tokyo.ac.jp/dspace/bitstream/2261/58904/1/wp076.pdf

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