Sectoral Price Facts in a Sticky-Price Model

Carlos Carvalho, Jae Won Lee and Woong Yong Park

American Economic Journal: Macroeconomics, 2021, vol. 13, issue 1, 216-56

Abstract: We develop a multisector sticky-price DSGE model that can endogenously deliver differential responses of prices to aggregate and sectoral shocks. Input-output production linkages and a (standard) monetary policy rule contribute to a slow response of prices to aggregate shocks. In turn, labor market segmentation at the sectoral level induces within-sector strategic substitutability in price-setting decisions, 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 United States and find that it accounts well for a range of sectoral price facts.

JEL-codes: E12 E21 E31 E32 E43 E52 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Sectoral price facts in a sticky-price model (2011)
Working Paper: Sectoral Price Facts in a Sticky-Price Model (2011)
Working Paper: Sectoral Price Facts in a Sticky-Price Model (2010)
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DOI: 10.1257/mac.20190205

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