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Examining Sectoral Co-Movement in Estimated Nominal Rigidities Models


  • Lee Junhee

    () (Yeungnam University)


Recently, 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.

Suggested Citation

  • Lee Junhee, 2009. "Examining Sectoral Co-Movement in Estimated Nominal Rigidities Models," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-22, May.
  • Handle: RePEc:bpj:bejmac:v:9:y:2009:i:1:n:19

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    References listed on IDEAS

    1. Sungbae An & Frank Schorfheide, 2007. "Bayesian Analysis of DSGE Models—Rejoinder," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 211-219.
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    6. Erceg, Christopher & Levin, Andrew, 2006. "Optimal monetary policy with durable consumption goods," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1341-1359, October.
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    12. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, January.
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    Cited by:

    1. 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.

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