Monetary business cycle accounting

Šustek, Roman (2010) Monetary business cycle accounting Review of Economic Dynamics, 14, (4), pp. 592-612. (doi:10.1016/


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This paper investigates the quantitative importance of various types of distortions for inflation and nominal interest rate dynamics by extending business cycle accounting to monetary models. Representing various classes of real and nominal distortions as ‘wedges’ in standard equilibrium conditions allows a quantitative assessment of those distortions. Decomposing the data into movements due to these wedges shows that distortions generating movements in TFP and wedges in equilibrium conditions for asset markets are essential. In contrast, wedges capturing the effects of sticky prices play less important role. These results are robust to alternative implementations of the accounting method.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/
ISSNs: 1094-2025 (print)
Keywords: business cycle accounting, inflation, nominal interest rate
Organisations: Economics
ePrint ID: 203661
Date :
Date Event
14 October 2010e-pub ahead of print
October 2011Published
Date Deposited: 17 Nov 2011 16:26
Last Modified: 18 Apr 2017 01:16
Further Information:Google Scholar

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