Durable goods, inter-sectoral linkages and monetary policy

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

Journal of Economic Dynamics and Control, 2011, vol. 35, issue 5, 730-745

Abstract: Durable goods pose a challenge for standard sticky-price models because the near constancy of their shadow value and their apparent price flexibility lead to perverse and counterfactual economic implications, such as the tendency of the durables and nondurables sectors to move in opposite directions following a monetary policy shock. This paper introduces input-output interactions and limited input mobility into an otherwise standard sticky-price model with durable and nondurable goods. The extended model generates substantial aggregate effects and positive sectoral comovement following a monetary policy shock, even when durable goods have flexible prices. The latter result is consistent with empirical evidence on the sectoral effects of monetary policy.

Keywords: Durability; Input-output; interactions; Roundabout; production; Sectoral; comovement; Monetary; policy (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Durable Goods, Inter-Sectoral Linkages and Monetary Policy (2008)
Working Paper: Durable Goods, Inter-Sectoral Linkages and Monetary Policy (2008)
Working Paper: Durable Goods, Inter-Sectoral Linkages and Monetary Policy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:35:y:2011:i:5:p:730-745

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