The cost channel reconsidered: a comment using an identification-robust approach

Abstract

We re-examine 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 US 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.Cost channel; Phillips curve; GMM; Generalized Empirical Likelihood; Weak Identification.