The Delayed Effects of Monetary Shocks in a Two-sector New Keynesian Model

Munechika Katayama and Kwang Hwan Kim

Discussion papers from Graduate School of Economics Project Center, Kyoto University

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 sucient 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)
Pages: 32 pages
Date: 2013-08
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: 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:kue:dpaper:e-13-003

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