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Sectoral Comovement, Monetary Policy Shocks, and Input–Output Structure

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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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File URL: http://hdl.handle.net/10.1111/j.1538-4616.2012.00529.x
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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 44 (2012)
Issue (Month): 6 (09)
Pages: 1225-1244

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Handle: RePEc:mcb:jmoncb:v:44:y:2012:i:6:p:1225-1244
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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