Economics at your fingertips  

Monetary Policy and the Relative Price of Durable Goods

Giovanni Melina () and Alessandro Cantelmo ()

No 2017/290, IMF Working Papers from International Monetary Fund

Abstract: In a SVAR model of the US, the response of the relative price of durables to a monetary contraction is either flat or mildly positive. It significantly falls only if narrowly defined as the ratio between new-house and nondurables prices. These findings are rationalized via the estimation of a two-sector New-Keynesian (NK) models. Durables prices are estimated to be as sticky as nondurables, leading to a flat relative price response to a monetary shock. Conversely, house prices are estimated to be almost flexible. Such results survive several robustness checks and a three-sector extension of the NK model. These findings have implications for building two-sector NK models with durable and nondurable goods, and for the conduct of monetary policy.

Keywords: WP; durable goods; monetary policy; durables; nondurables; price stickiness; relative price; nondurable goods; markup shock; price indexation; nondurables price; monetary policy shock; Sticky prices; Housing; Housing prices; Consumption; Inflation (search for similar items in EconPapers)
Pages: 81
Date: 2017-12-22
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Journal Article: Monetary policy and the relative price of durable goods (2018) Downloads
Working Paper: Monetary Policy and the Relative Price of Durable Goods (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().

Page updated 2022-01-16
Handle: RePEc:imf:imfwpa:2017/290