Monetary policy shocks transmit through countercyclical markups: Bank of Canada paper

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A Bank of Canada paper published on Friday finds that countercyclical markups in Canada account for a large fraction of the real effects of monetary policy shocks.

Oleksiy Kryvtsov and Virgiliu Midrigan, the paper's authors, use data on inventories in Canada with a New Keynesian model to examine the motive for inventory accumulation and how markups respond to monetary policy shocks. Kryvtsov and Midrigan are particularly interested in learning whether the real effects of monetary policy shocks

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