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ABSTRACT. Bils et al. state that models with sticky prices predict that monetary policy changes will affect relative prices and relative quantities in the short run because some prices are more flexible than others. Svensson claims that monetary policy actions in industrialized countries normally affect real activity and inflation with considerable lags. Goodfriend locates the transmission of interest rate policy to employment and inflation in its leverage over the markup, and traces the effects on employment and inflation of three types of disturbances: optimism or pessimism about future income prospects, a temporary productivity shock, and a shift in trend productivity growth.

 

DORIN DOBRISAN
 
 
 

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