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Download the Paper (492 K, PDF file) - April 17, 2000 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing.

ABSTRACT:
This paper presents evidence that the "cost channel" may be an important part of the monetary transmission mechanism. We argue that if working capital is an essential component of production and distribution, monetary contractions can affect output through a supply channel as well as the traditional demand-type channels. We specify an industry equilibrium model and use it to interpret the results of a VAR analysis. We find that following a monetary contraction, many industries exhibit periods of falling output and rising price-wage ratios, consistent with a supply shock in our model. We also show that the effects are noticeably more pronounced during the period before 1979.

SUGGESTED CITATION:
Marvin J. Barth III and Valerie A. Ramey, "The Cost Channel of Monetary Transmissions" (April 17, 2000). Department of Economics, UCSD. Paper 2000-08.
http://repositories.cdlib.org/ucsdecon/2000-08