Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/59465
Authors: 
Carvalho, Carlos
Lee, Jae Won
Year of Publication: 
2011
Series/Report no.: 
Working Papers, Department of Economics, Rutgers, the State University of New Jersey 2011,33
Abstract: 
We develop a multi-sector sticky-price DSGE model that can endogenously deliver differential responses of prices to aggregate and sectoral shocks. Input-output production linkages induce across-sector pricing complementarities that contribute to a slow response of prices to aggregate shocks. In turn, input-market segmentation at the sectoral level induces within-sector pricing substitutability, which helps the model deliver a fast response of prices to sector-specific shocks. We estimate the model using aggregate and sectoral price and quantity data for the U.S., and find that it accounts extremely well for a range of sectoral price facts.
Subjects: 
heterogeneity
price stickiness
sectoral data
FAVAR
sectoral shocks
JEL: 
E30
E31
E32
Document Type: 
Working Paper

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