The State-Dependent Effects of Monetary Policy: Calvo versus Rotemberg

Kamalyan, Hayk (2021): The State-Dependent Effects of Monetary Policy: Calvo versus Rotemberg.

Abstract

This paper evaluates state-dependence in monetary policy transmission mechanism under Calvo and Rotemberg price adjustment schemes. Although the two models are equivalent to first order, they produce very different results once considered at a higher order. In particular, the Rotemberg model produces more state-dependence compared to the Calvo model. The result is reversed once the macroeconomic wedges are eliminated from the models.

• Item Type: MPRA Paper
• Language: English
• Keywords: State-Dependence, Calvo, Rotemberg, Monetary Policy
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy

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