【IMI Working Paper No. 1605 [EN]】The Effects of Monetary Policy on Input Inventories

2016-10-27 IMI

【Abstract】 This paper explores the long-run and short-run effects of monetary policy on input inventories in a search model with monetary prorogation and two-stage production. Inventories arise endogenously due to search frictions. In the long run, monetary policy has hump-shaped real effects on steady-state input inventory investment, inventory-to-sales ratio as well as sales. We show that the effect of an increase in the money growth rate is driven by both the extensive and intensive margin in the finished goods market. The model is then calibrated to the U.S. data to study the short-run effect of monetary policy. We find that our model can reproduce the stylized facts of input inventories well and input inventories can amplify aggregate fluctuations. 【Keywords】 monetary shock; input inventories; business cycles; monetary search 【Authors】 Dai Tiantian, Renmin University of China Liu Xiangbo, IMI Research Fellow; Assistant Professor, School of Labor and Human Resources, RUC 【IMI Working Paper No. 1605 [EN]】The Effects of Monetary Policy on Input Inventories

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【IMI Working Paper No. 1605 [EN]】The Effects of Monetary Policy on Input Inventories

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