Supply side inflation persistence

- We explore the cost channel of the transmission of monetary policy in the Calvo pricing model.
- We provide a potential mechanism to increase the persistence of inflation responses to monetary shocks.
- Hump-shaped responses of inflation to monetary shocks are obtained under purely nominal rigidities.

We explore the role of the cost channel in accounting for inflation persistence in the New Keynesian model with Calvo pricing. Hump-shaped responses of inflation to monetary shocks are obtained under purely nominal rigidities.