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dc.contributor.authorKryvtsov, Oleksiyen_US
dc.contributor.authorMidrigan, Virgiliuen_US
dc.date.accessioned2011-03-07en_US
dc.date.accessioned2011-12-15T12:56:07Z-
dc.date.available2011-12-15T12:56:07Z-
dc.date.issued2011en_US
dc.identifier.urihttp://hdl.handle.net/10419/53805-
dc.description.abstractRecent New Keynesian models of macroeconomy view nominal cost rigidities, rather than nominal price rigidities, as the key feature that accounts for the observed persistence in output and inflation. Kryvtsov and Midrigan (2010a,b) reassess these conclusions by combining a theory based on nominal rigidities and storable goods with direct evidence on inventories for the U.S. This paper applies Kryvtsov and Midrigan's model to the case of Canada. The model predicts that if costs of production are sticky and markups do not vary much in response to, say, expansionary monetary policy, firms react by excessively accumulating inventories in anticipation of future cost increases. In contrast, in the Canadian data inventories are fairly constant over the cycle and in response to changes in monetary policy. Similarly to Kryvtsov and Midrigan, we show that markups must decline sufficiently in times of a monetary expansion in order to reduce firms' incentive to hold inventories and thus bring the model's inventory predictions in line with the data. The model consistent with salient features of the dynamics of inventories in the Canadian data implies that countercyclical markups account for a sizable (50-80%) fraction of the response of real variables to monetary shocks.en_US
dc.language.isoengen_US
dc.publisherBank of Canada Ottawaen_US
dc.relation.ispartofseriesBank of Canada Working Paper 2011,9en_US
dc.subject.jelE31en_US
dc.subject.jelF12en_US
dc.subject.ddc330en_US
dc.subject.keywordBusiness fluctuations and cyclesen_US
dc.subject.keywordTransmission of monetary policyen_US
dc.subject.stwSchocken_US
dc.subject.stwBetriebliche Preispolitiken_US
dc.subject.stwPreisrigiditäten_US
dc.subject.stwLagermanagementen_US
dc.subject.stwGeldpolitiken_US
dc.subject.stwTransmissionsmechanismusen_US
dc.subject.stwKanadaen_US
dc.titleInventories, markups and real rigidities in sticky price models of the Canadian economyen_US
dc.typeWorking Paperen_US
dc.identifier.ppn651690900en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
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