Capacity utilization and Monetary Policy

Pedro Pablo Álvarez Lois ()
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Pedro Pablo Álvarez Lois: Universidad Carlos III de Madrid

No 306, Working Papers from Banco de España

Abstract: This paper presents a model featuring variable utilization rates across firms due to production inflexibilities and idiosyncratic demand uncertainty. Within a New Keynesian framework, we show how the corresponding bottlenecks and stock-outs generate asymmetries in the transmission mechanism of monetary policy. We derive an expression for the Phillips curve where the dynamics of inflation depend on real marginal costs and on a measure of resource underutilization.

Keywords: Capacity Constraints; Nominal Rigidities Idiosyncratic Uncertainty; Asymmetries (search for similar items in EconPapers)
JEL-codes: E13 E31 E42 E52 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2003-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0306

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