Sectoral Price Rigidity and Aggregate Dynamics

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

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: In this paper, we study the macroeconomic implications of sectoral heterogeneity and, in particular, heterogeneity in price setting, through the lens of a highly disaggregated multi-sector model. The model incorporates several realistic features and is estimated using a mix of aggregate and sectoral U.S. data. The frequencies of price changes implied by our estimates are remarkably consistent with those reported in micro-based studies, especially for non-sale prices. The model is used to study (i) the contribution of sectoral characteristics to the observed cross-sectional heterogeneity in sectoral output and inflation responses to a monetary policy shock, (ii) the implications of sectoral price rigidity for aggregate output and inflation dynamics and for cost pass-through, and (iii) the role of sectoral shocks in explaining sectoral prices and quantities.

Keywords: Multi-sector models; price stickiness; simulated method of moments; sectoral shocks; monetary policy (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Pages: 64 pages
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Sectoral price rigidity and aggregate dynamics (2014)
Working Paper: Sectoral Price Rigidity and Aggregate Dynamics (2009)
Working Paper: Sectoral Price Rigidity and Aggregate Dynamics (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:01-2009

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