IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Sticky Price Models, Durable Goods, and Real Wage Rigidities

  • M. Alper Çenesiz

    ()

    (cef.up, Faculdade de Economia, Universidade do Porto)

  • Luís Guimarães

    ()

    (cef.up, Faculdade de Economia, Universidade do Porto)

The standard two-sector New Keynesian model with durable goods is at odds with conventional wisdom and VAR evidence: Following a monetary shock, it generates (i) either negative or no comovement across sectoral outputs, and (ii) aggregate neutrality of money when durable-goods' prices are flexible. We reconcile theory with evidence by incorporating real wage rigidities into the standard model: As long as durable-goods' prices are more flexible than nondurable-goods' prices, we obtain positive sectoral comovement and, thus, aggregate non-neutrality of money.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://cefup.fep.up.pt/uploads/WorkingPapers/wp1305.pdf
Download Restriction: no

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1305.

as
in new window

Length: 15 pages
Date of creation: Apr 2013
Date of revision:
Handle: RePEc:por:cetedp:1305
Contact details of provider: Postal:
Rua Dr. Roberto Frias, 4200 PORTO

Phone: 351-22-5571100
Fax: 351-22-5505050
Web page: http://www.fep.up.pt/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Robert Barsky & Christopher House & Miles Kimball, 2003. "Do Flexible Durable Goods Prices Undermine Sticky Price Models?," Macroeconomics 0302003, EconWPA.
  2. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  3. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  4. 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.
  5. Carlstrom, Charles T. & Fuerst, Timothy S., 2010. "Nominal Rigidities, Residential Investment, And Adjustment Costs," Macroeconomic Dynamics, Cambridge University Press, vol. 14(01), pages 136-148, February.
  6. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  7. Olivier Blanchard & Jordi Galí, 2005. "Real Wage Rigidities and the New Keynesian Model," Working Papers 243, Barcelona Graduate School of Economics.
  8. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  9. Shimer, Robert, 2012. "Wage rigidities and jobless recoveries," Journal of Monetary Economics, Elsevier, vol. 59(S), pages S65-S77.
  10. Robert Barsky & Christopher L. House & Miles Kimball, 2005. "Sticky Price Models and Durable Goods," Macroeconomics 0501031, EconWPA.
  11. Laurence Ball & David Romer, 1987. "Real Rigidities and the Non-Neutrality of Money," NBER Working Papers 2476, National Bureau of Economic Research, Inc.
  12. Duval, Romain & Vogel, Lukas, 2007. "How do nominal and real rigidities interact? A tale of the second best," MPRA Paper 7282, University Library of Munich, Germany.
  13. Erceg, Christopher & Levin, Andrew, 2006. "Optimal monetary policy with durable consumption goods," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1341-1359, October.
  14. Nao Sudo, 2008. "Sectoral Co-Movement, Monetary-Policy Shock, and Input-Output Structure," IMES Discussion Paper Series 08-E-15, Institute for Monetary and Economic Studies, Bank of Japan.
  15. Monacelli, Tommaso, 2006. "New Keynesian Models, Durable Goods and Collateral Constraints," CEPR Discussion Papers 5916, C.E.P.R. Discussion Papers.
  16. Amato, Jeffery D. & Laubach, Thomas, 2003. "Estimation and control of an optimization-based model with sticky prices and wages," Journal of Economic Dynamics and Control, Elsevier, vol. 27(7), pages 1181-1215, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:por:cetedp:1305. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ana Bonanca)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.