Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171083
Authors: 
Pasten, Ernesto
Schoenle, Raphael S.
Weber, Michael
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6619
Abstract: 
We study the aggregate implications of sectoral shocks in a multi-sector New Keynesian model featuring sectoral heterogeneity in price stickiness, sector size, and input-output linkages. We calibrate a 341 sector version of the model to the United States. Both theoretically and empirically, sectoral heterogeneity in price rigidity (i) generates sizable GDP volatility from sectoral shocks, (ii) amplifies both the "granular" and the "network" effects, (iii) alters the identity and relative contributions of the most important sectors for aggregate fluctuations, (iv) can change the sign of fluctuations, (v) invalidates the Hulten (1978) Theorem, and (vi) generates a "frictional" origin of aggregate fluctuations.
Subjects: 
input-output linkages
sticky prices
idiosyncratic shocks
JEL: 
E31
E32
O40
Document Type: 
Working Paper

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