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Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

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  • MUNECHIKA KATAYAMA
  • KWANG HWAN KIM

Abstract

Sectoral comovement of output and hours worked is a prominent feature of business cycle data. However, most two†sector neoclassical models fail to generate this sectoral comovement. We construct and estimate a two†sector neoclassical Dynamic Stochastic General Equilibrium (DGSE) model generating sectoral comovement in response to both anticipated and unanticipated shocks. The key to our model's success is a significant degree of intersectoral labor immobility, which we estimate using data on sectoral hours worked. Furthermore, we demonstrate that imperfect intersectoral labor mobility provides a better explanation for the sectoral comovement than an alternative model emphasizing the role of labor†supply wealth effects.

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  • Munechika Katayama & Kwang Hwan Kim, 2018. "Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(1), pages 77-114, February.
  • Handle: RePEc:wly:jmoncb:v:50:y:2018:i:1:p:77-114
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    File URL: https://doi.org/10.1111/jmcb.12454
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    Cited by:

    1. Munechika Katayama & Kwang Hwan Kim, 2018. "Uncertainty Shocks and the Relative Price of Investment Goods," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 30, pages 163-178, October.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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