01835cas a2200241 a 4500 AALejournalIMF008470 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451856910 1018-5941 BD-DhAAL BD-DhAAL Rabanal, Pau. The Cost Channel of Monetary Policy : Further Evidence for the United States and the Euro Area / Pau Rabanal. Washington, D.C. : International Monetary Fund, 2003. 1 online resource (34 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper estimates the importance of the cost channel of monetary policy in a New Keynesian model of the business cycle. A model with nominal rigidities is extended by assuming that a fraction of firms need to borrow money to pay their wage bill. Hence, monetary policy tightenings increase effective unit labor costs of production, and might imply an increase in inflation. The model explains the joint dynamics of output, inflation, real wages, and interest rates, and is estimated using a Bayesian framework and data for the United States and the euro area. The main result is that cost channel effects are absent in both cases. Moreover, it is not possible to obtain a "price puzzle" type of behavior from estimated impulse responses to monetary policy shocks. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2003/149 Full text available on IMF http://elibrary.imf.org/view/journals/001/2003/149/001.2003.issue-149-en.xml IMF e-Library