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Durable Goods, Inter-Sectoral Linkages and Monetary Policy

Author

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  • BOUAKEZ, Hafedh
  • CARDIA, Emanuela
  • RUGE-MURCIA, Francisco J.

Abstract

Barsky, House and Kimball (2007) show that introducing durable goods into a sticky-price model leads to negative sectoral comovement of production following a monetary policy shock and, under certain conditions, to aggregate neutrality. These results appear to undermine sticky-price models. In this paper, we show that these results are not robust to two prominent and realistic features of the data, namely input-output interactions and limited mobility of productive inputs. When extended to allow for both features, the sticky-price model with durable goods delivers implications in line with VAR evidence on the effects of monetary policy shocks.

Suggested Citation

  • 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.
    • Handle: RePEc:mtl:montde:2008-10
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    File URL: http://hdl.handle.net/1866/2578
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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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