EconStor >
Rutgers University >
Department of Economics, Rutgers University >
Working Papers, Department of Economics, Rutgers University >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/59464
  
Title:Heterogeneous households in a sticky-price model PDF Logo
Authors:Lee, Jae Won
Issue Date:2009
Series/Report no.:Working Papers, Department of Economics, Rutgers, the State University of New Jersey 2010,01
Abstract:This paper introduces heterogeneous households into an otherwise standard sticky-price model with industry-specific labor markets. Households differ in labor incomes and asset markets are incomplete. I show that household heterogeneity affects equilibrium dynamics nontrivially by amplifying price stickiness endogenously through wealth effects on labor supply. To quantify the importance of household heterogeneity in amplifying stickiness, I estimate and compare representative and heterogeneous household models. The quantitative exercise shows the heterogenous household model performs better than its representative counterpart in accounting for aggregate and sectoral dynamics in the U.S., while being more consistent with empirical evidence on nominal rigidity at the aggregate and sectoral levels, thanks to the stickiness endogenously generated by the model.
Subjects:heterogeneity
price stickiness
multiple sectors
DSGE model
Bayesian estimation
real rigidities
JEL:C51
E13
E31
E32
E44
J20
Document Type:Working Paper
Appears in Collections:Working Papers, Department of Economics, Rutgers University

Files in This Item:
File Description SizeFormat
635881454.pdf438.46 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/59464

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.