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A NOTE ON INCREASING HAZARD FUNCTIONS AND THE MONETARY TRANSMISSION MECHANISM

Published online by Cambridge University Press:  10 June 2014

Fang Yao
Fang Yao*
Affiliation:
Reserve Bank of New Zealand and University of Erlangen-Nuremberg
*
Address correspondence to: Fang Yao, P.O. Box 2498, Wellington 6140, New Zealand; e-mail: fang.yao@rbnz.govt.nz.
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Abstract

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This note studies the implications of the price reset hazard function for the monetary transmission mechanism of sticky price models. I first document some general analytical results that highlight the central role of the price (accumulative) distribution in linking the hazard function and the impulse response function. I find that nominal rigidity underlying increasing hazard functions is more successful than real rigidity in replicating realistic macro persistence. In addition, numerical simulations show that the interaction between the increasing hazard function and the real rigidity provides a powerful propagation mechanism for monetary shocks.

Keywords

Price Reset Hazard FunctionNominal RigidityReal RigidityMonetary Policy

Information

Type
Notes
Information
Macroeconomic Dynamics , Volume 20 , Issue 1 , January 2016, pp. 446 - 459
Copyright
Copyright © Cambridge University Press 2014 

References

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