Sectoral Price Rigidity and Aggregate Dynamics

Hafedh Bouakez (), Emanuela Cardia () and Francisco J. Ruge-Murcia ()

Cahiers de recherche from CIRPEE

Abstract: In this paper, we study the macroeconomic implications of sectoral heterogeneity and, in particular, heterogeneity in price setting, through the lens of a highly disaggregated multi-sector model. The model incorporates several realistic features and is estimated using a mix of aggregate and sectoral U.S. data. The frequencies of price changes implied by our estimates are remarkably consistent with those reported in micro-based studies, especially for non-sale prices. The model is used to study (i) the contribution of sectoral characteristics to the observed cross sectional heterogeneity in sectoral output and inflation responses to a monetary policy shock, (ii) the implications of sectoral price rigidity for aggregate output and inflation dynamics and for cost pass-through, and (iii) the role of sectoral shocks in explaining secotral prices and quantities.

Keywords: Multi-sector models; price stickiness; simulated method of moments; sectoral shocks; monetary policy (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Date: Written

Downloads: (external link)
http://www.cirpee.org/fileadmin/documents/Cahiers_2009/CIRPEE09-06.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:lvl:lacicr:0906

Access Statistics for this paper

More papers in Cahiers de recherche from CIRPEE
Contact information at EDIRC.
Series data maintained by Johanne Perron ().