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The cost channel of monetary transmission-revisited

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  • Doh-Khul Kim
  • William D. Lastrapes

Abstract

This article empirically re-examines the importance of the cost channel of monetary transmission-the effect of money supply shocks on the costs of production and supply, as opposed to the traditional effect on demand. Unlike Barth and Ramey (2002), this article identifies the response of industry-level wages to money supply shocks by assuming long-run monetary neutrality. The pervasive findings of a positive response of real wages to money supply shocks in this study provide even stronger support for the cost channel than Barth and Ramey (2002).

Suggested Citation

  • Doh-Khul Kim & William D. Lastrapes, 2007. "The cost channel of monetary transmission-revisited," Applied Economics Letters, Taylor & Francis Journals, vol. 14(10), pages 725-730.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:10:p:725-730
    DOI: 10.1080/13504850600592465
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    Cited by:

    1. Lasitha R. C. Pathberiya, 2016. "Optimal Monetary Policy at the Zero Lower Bound on Nominal Interest Rates in a Cost Channel Economy," Discussion Papers Series 568, School of Economics, University of Queensland, Australia.
    2. David Beckworth & Kenneth P. Moon & J. Holland Toles, 2012. "Can Monetary Policy Influence Long-Term Interest Rates? It Depends," Economic Inquiry, Western Economic Association International, vol. 50(4), pages 1080-1096, October.
    3. David Beckworth & Kenneth Moon & J. Holland Toles, 2010. "Monetary policy and corporate bond yield spreads," Applied Economics Letters, Taylor & Francis Journals, vol. 17(12), pages 1139-1144.

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