The authors thank the editor and a referee for insightful comments and suggestions. The first author acknowledges financial support from ESRC grant RES-061-25-0115. The second author acknowledges financial support under grant PTDC/ECO/68367/2006 from the Fundação para a Ciência e Tecnologia. We thank Ron Smith, Paul Levine, and participants at the North American Econometric Society Summer Conference 2008 in Pittsburgh and the Econometric Society European Meeting 2008 in Milan for useful comments. We are also indebted to Patrik Guggenberger for discussions on the implementation of GEL procedures. The usual disclaimer applies.
The Cost Channel Reconsidered: A Comment Using an Identification-Robust Approach
Article first published online: 25 NOV 2010
© 2010 The Ohio State University
Journal of Money, Credit and Banking
Volume 42, Issue 8, pages 1703–1712, December 2010
How to Cite
GABRIEL, V. J. and MARTINS, L. F. (2010), The Cost Channel Reconsidered: A Comment Using an Identification-Robust Approach. Journal of Money, Credit and Banking, 42: 1703–1712. doi: 10.1111/j.1538-4616.2010.00361.x
- Issue published online: 25 NOV 2010
- Article first published online: 25 NOV 2010
- Received May 1, 2009; and accepted in revised form March 15, 2010.
- cost channel;
- Phillips curve;
- generalized empirical likelihood;
- weak identification
We reexamine the empirical relevance of the cost channel of monetary policy (e.g., Ravenna and Walsh 2006), employing recently developed moment-conditions inference methods, including identification-robust procedures. Using U.S. data, our results suggest that the cost channel effect is poorly identified and we are thus unable to corroborate the previous results in the literature.