The delayed effects of monetary shocks in a two-sector New Keynesian model

Munechika Katayama and Kwang Hwan Kim

Journal of Macroeconomics, 2013, vol. 38, issue PB, 243-259

Abstract: This paper studies a two-sector New Keynesian model that captures the hump-shaped response of non-durable and durable spending to a monetary shock when non-durable prices are sticky and durable goods are flexibly priced. Based on the estimated parameters, we show that habit formation and investment adjustment costs are not sufficient to generate the gradual response of non-durable and durable spending in this setup. We find that nominal wage rigidity and non-separable preferences between consumption and labor are also necessary to delay the peak response of non-durable and durable spending in the estimated two-sector New Keynesian model.

Keywords: Sticky prices; Sticky wages; Non-separable preferences; Two-sector New Keynesian model (search for similar items in EconPapers)
JEL-codes: E21 E30 E31 E32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: The Delayed Effects of Monetary Shocks in a Two-sector New Keynesian Model (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:38:y:2013:i:pb:p:243-259

DOI: 10.1016/j.jmacro.2013.08.018

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