Publication Type

Journal Article

Publication Date

6-2017

Abstract

A New Keynesian framework with endogenous energy production is proposed to investigate the role of monetary policy in addressing disturbances in energy markets. The novelty of the model lies in the endogenous production of energy with convex costs, explicit modeling of goods with different degrees of energy-dependency and sectoral price rigidities. Our analyses prescribe the desirable monetary responses to four types of energy price shocks, highlighting the distinct characteristics of each shock and affirming the need for diverse policy considerations. We also found several points of divergence in relation to previous studies on addressing energy supply shocks. In addition, we shed light on the role of sectoral price rigidities in the shocks' propagation.

Keywords

DSGE model, Energy, Energy price shock, Monetary policy

Discipline

Economic Policy | Economics

Publication

BE Journal of Macroeconomics

Volume

17

Issue

2

ISSN

1935-1690

Identifier

10.1017/S0022109017000515

Publisher

De Gruyter

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

http://doi.org./10.1017/S0022109017000515

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