(Downward) Nominal Rigidity in Networks: Production Structure and the Amplification of Monetary Policy

I study how the production network shapes monetary policy transmission. More upstream industries exhibit larger cumulative price responses to monetary shocks, as price adjustments must pass through multiple downstream pricing decisions before reaching final demand. This amplification is strongly asymmetric: the effect of expansionary shocks is roughly three times the pooled estimate, while the effect of contractionary shocks is negligible reflecting downward nominal rigidity. Within a multi-sector New Keynesian model, I show that network position determines price flexibility — upstream sectors, which sell predominantly to other firms, reprice more frequently — and this flexibility differential propagates through cost linkages, amplifying upstream price responses. Calibrating the model to the U.S. input-output matrix captures the pattern of the empirical estimates. I find consistent real activity responses, with downstream industries absorbing contractionary shocks through output, while upstream ones adjusting through prices. Suggestive evidence confirms supply chain cascade effects, showing that supplier prices absorb the upstreamness effect and input intensity amplifies it.