Examining Sectoral Co-Movement in Estimated Nominal Rigidities Models
AbstractRecently, Barsky et al. (2007) found that a sticky-price model does not generate sectoral co-movement and that the propagation mechanism is weak in response to monetary shocks if prices in the durable goods sector are significantly flexible, which raises a co-movement problem in sticky-price models. In this paper, we estimate sticky-price models with both durable and nondurable goods sectors in order to examine sectoral price stickiness and co-movement using actual data. The estimation results show that prices in both sectors are relatively sticky and the co-movement problem does not occur in the usual settings. We find, however, that the co-movement problem may occur when we introduce persistent price-markup shocks in a sticky-price model. We also estimate nominal rigidities models with sticky wages as well as sticky prices and find that sticky wages are helpful in explaining sectoral co-movement in addition to sticky prices.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 9 (2009)
Issue (Month): 1 (May)
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Web page: http://www.degruyter.com
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- Bouakez, Hafedh & Cardia, Emanuela & Ruge-Murcia, Francisco J., 2011.
"Durable goods, inter-sectoral linkages and monetary policy,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 35(5), pages 730-745, May.
- Hafedh Bouakez & Emanuela Cardia & Francisco J. Ruge-Murcia, 2008. "Durable Goods, Inter-Sectoral Linkages and Monetary Policy," Cahiers de recherche 0821, CIRPEE.
- BOUAKEZ, Hafedh & CARDIA, Emanuela & RUGE-MURCIA, Francisco J., 2008. "Durable Goods, Inter-Sectoral Linkages and Monetary Policy," Cahiers de recherche 2008-10, Universite de Montreal, Departement de sciences economiques.
- BOUAKEZ, Hafedh & CARDIA, Emanuela & RUGE-MURCIA, Francisco J., 2008. "Durable Goods, Inter-Sectoral Linkages and Monetary Policy," Cahiers de recherche 15-2008, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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