The price effects of monetary shocks in a network economy - HAL-SHS - Sciences de l'Homme et de la Société Accéder directement au contenu
Article Dans Une Revue Journal of Economic Behavior and Organization Année : 2019

The price effects of monetary shocks in a network economy

Résumé

Empirical evidence shows monetary shocks have two temporary effects on the distribution of prices. One, the dispersion of cross-section of prices increases in response to monetary shocks. Two, some prices change in the ‘wrong’ direction: some prices decrease in response to positive monetary shocks, and increase in response to negative monetary shocks. We present a model that generates the two effects of monetary shocks on the distribution of prices as an out-of-equilibrium phenomena. Firms are related to each other through a production network. Monetary shocks change the working capital of a subset of firms and percolate to other firms through buyer-seller linkages. Price dispersion increases because the percolation of a monetary shock through the production network causes prices to differentially deviate from their steady state values. Some prices change in the wrong direction because a shift in one firm’s demand causes a shift in another firm’s supply (and vice-versa), thereby generating complicated chains of bi-directional price changes. Monetary shocks can significantly disturb relative prices even when all prices are fully flexible.
Fichier principal
Vignette du fichier
S0167268119301994.pdf (1.12 Mo) Télécharger le fichier
Origine Fichiers produits par l'(les) auteur(s)

Dates et versions

halshs-02334593 , version 1 (25-10-2021)

Licence

Identifiants

Citer

Antoine Mandel, Davoud Taghawi-Nejad, Vipin Veetil. The price effects of monetary shocks in a network economy. Journal of Economic Behavior and Organization, 2019, 164, pp.300-316. ⟨10.1016/j.jebo.2019.06.009⟩. ⟨halshs-02334593⟩
165 Consultations
148 Téléchargements

Altmetric

Partager

Gmail Mastodon Facebook X LinkedIn More