Capacity Utilization and Monetary Policy

• Autores: Pedro Pablo Álvarez Lois
• Localización: Documentos de trabajo - Banco de España, ISSN 0213-2710, Nº 6, 2003, págs. 7-49
• Idioma: inglés
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• Resumen

  • This paper presents a model featuring variable utilization rates across firms due to production inflexibilities and idiosyncratic demand uncertainty. Within a New Keynesian framework, we show how the corresponding bottlenecks and stock-outs generate asymmetries in the transmission mechanism of monetary policy. We derive an expression for the Phillips curve where the dynamics of inflation depend on real marginal costs and on a measure of resource underutilization.