Sticky Price Models, Durable Goods, and Real Wage Rigidities

Alper Çenesiz () and Luís Guimarães ()
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Luís Guimarães: cef.up, Faculdade de Economia, Universidade do Porto

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: The standard two-sector New Keynesian model with durable goods is at odds with conventional wisdom and VAR evidence: Following a monetary shock, it generates (i) either negative or no comovement across sectoral outputs, and (ii) aggregate neutrality of money when durable-goods' prices are flexible. We reconcile theory with evidence by incorporating real wage rigidities into the standard model: As long as durable-goods' prices are more flexible than nondurable-goods' prices, we obtain positive sectoral comovement and, thus, aggregate non-neutrality of money.

Keywords: Durable goods; Real Wage Rigidities; Comovement; Money. (search for similar items in EconPapers)
JEL-codes: E32 E51 E52 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2013-04, Revised 2017-11
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Sticky Price Models, Durable Goods, and Real Wage Rigidities (2019)
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