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Sectoral Co-Movement, Monetary-Policy Shock, and Input-Output Structure

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  • Nao Sudo

    (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: nao.sudou@boj.or.jp))

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Abstract

The co-movement of output across the sector producing non- durables (that is, non-durable goods and services) and the sector producing durables is well-established in the monetary business-cycle literature. However, standard sticky-price models that incorporate sectoral heterogeneity in price stickiness (that is, sticky non-durables prices and flexible durables prices) cannot generate this feature. We argue that an input-output structure provides a solution to this problem. Here we develop a two-sector model with an input-output structure, which is calibrated to the U.S. economy. In the model, each sector's output affects those of the others by acting as an intermediate input This connection between the sectors provides a channel through which sectoral co-movement is induced.

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Bibliographic Info

Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 08-E-15.

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Date of creation: Jul 2008
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Handle: RePEc:ime:imedps:08-e-15

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Keywords: Monetary Policy; Input-Output Matrix; Durables; Non-durables;

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Citations

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Cited by:
  1. Muto, Ichiro & Sudo, Nao & Yoneyama, Shunichi, 2013. "Productivity Slowdown in Japan’s Lost Decades: How Much of It is Attributed to Financial Factors?," Dynare Working Papers 28, CEPREMAP.
  2. repec:van:wpaper:vuecon-sub-13-00002 is not listed on IDEAS
  3. Chen, Been-Lon & Liao, Shian-Yu, 2014. "Capital, credit constraints and the comovement between consumer durables and nondurables," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 39(C), pages 127-139.
  4. Ivan Petrella & Emiliano Santoro, . "Optimal Monetary Policy with Durable Consumption Goods and Factor Demand Linkages," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 2009-04, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised May 2009.
  5. M. Alper Çenesiz & Luís Guimarães, 2013. "Sticky Price Models, Durable Goods, and Real Wage Rigidities," CEF.UP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 1305, Universidade do Porto, Faculdade de Economia do Porto.
  6. Ivan Petrella & Raffaele Rossi & Emiliano Santoro, 2012. "Monetary Policy with Sectoral Linkages and Durable Goods," Discussion Papers 12-19, University of Copenhagen. Department of Economics.

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