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Price Rigidities and the Granular Origins of Aggregate Fluctuations

Ernesto Pasten (), Raphael S. Schoenle and Michael Weber ()

No 6619, CESifo Working Paper Series from CESifo Group Munich

Abstract: We study the aggregate implications of sectoral shocks in a multi-sector New Keynesian model featuring sectoral heterogeneity in price stickiness, sector size, and input-output linkages. We calibrate a 341 sector version of the model to the United States. Both theoretically and empirically, sectoral heterogeneity in price rigidity (i) generates sizable GDP volatility from sectoral shocks, (ii) amplifies both the “granular” and the “network” effects, (iii) alters the identity and relative contributions of the most important sectors for aggregate fluctuations, (iv) can change the sign of fluctuations, (v) invalidates the Hulten (1978) Theorem, and (vi) generates a “frictional” origin of aggregate fluctuations.

Keywords: input-output linkages; sticky prices; idiosyncratic shocks (search for similar items in EconPapers)
JEL-codes: E31 E32 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed

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Related works:
Working Paper: Price rigidities and the granular origins of aggregate fluctuations (2018) Downloads
Working Paper: Price rigidities and the granular origins of aggregate fluctuations (2017) Downloads
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