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Monetary Policy Rules, Real Rigidity and Endogenous Persistence

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  • George J. Bratsiotis
  • Christopher Martin

Abstract

The bulk of literature on real rigidity attempts to identify sources of real rigidity in market imperfections while assuming that the money supply is exogenously set. This paper shows that monetary policy preferences affect the responsiveness of marginal cost to output and through this channel they are shown to determine (i) the degree of real rigidity and (ii) the degree of endogenous persistence. We find that substantial levels of real rigidity and persistence can be generated using plausible parameters values, without relying on market imperfections or other sources of real rigidity.

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  • George J. Bratsiotis & Christopher Martin, 2003. "Monetary Policy Rules, Real Rigidity and Endogenous Persistence," Economics and Finance Discussion Papers 02-31, Economics and Finance Section, School of Social Sciences, Brunel University.
    • Handle: RePEc:bru:bruedp:02-31
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    Cited by:

    1. Ronny Mazzocchi, 2013. "Scope and Flaws of the New Neoclassical Synthesis," DEM Discussion Papers 2013/13, Department of Economics and Management.

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