Energy and the Macroeconomy: The Role of Consumer Durables

Karsten Jeske and Rajeev Dhawan ()

No 719, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: So far the literature on DSGE models with energy price shocks models energy on the production side only. In these models, energy shocks are responsible for only a negligible share of output fluctuations. We study the robustness of this finding. The aim of our paper is to model the response of household behavior to energy shocks. Specifically, in addition to energy on the production side, we explicitly model private consumption of energy, durable goods and non-durable goods in a DSGE model. We calibrate the model to match energy and durable goods consumption observed in U.S. data and simulate the economy to compare business cycle statistics to those coming from an economy without durable goods. We find that modeling private energy consumption as a complement to durable goods consumption does not significantly raise the share of output fluctuations coming from energy shocks. TFP shocks continue to be the driving force behind business cycles

Keywords: Energy Prices; Business Cycles; Durable Goods (search for similar items in EconPapers)
JEL-codes: E32 Q43 (search for similar items in EconPapers)
Date: 2006-12-03

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Persistent link: http://EconPapers.repec.org/RePEc:red:sed006:719

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