Endogenous money or sticky prices?-comment on monetary non-neutrality and inflation dynamics [An article from: Journal of Economic Dynamics and Control]

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Description:
We show that the highly persistent inflation dynamics and its lead-lag relationship with output can be explained by a standard flexible price RBC model augmented with endogenous monetary policy. Endogenous monetary policy acting upon the illusion that prices are sticky and money is effective can create price movements that appear to indicate price stickiness, although there is none in the economy.