Sectoral Price Facts in a Sticky-Price Model

Jae Won Lee and Carlos Carvalho

No 997, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: We develop a multi-sector sticky-price DSGE model that can endogenously deliver differential responses of prices to aggregate and sectoral shocks. Input-output production linkages induce across-sector pricing complementarities that contribute to a slow response of prices to aggregate shocks. In turn, labor-market segmentation at the sectoral level induces within-sector pricing substitutability, which helps the model deliver a fast response of prices to sector-specific shocks. Estimating the Factor Augmented Vector Autoregression specification of Boivin, Giannoni and Mihov (2009) on data generated by a parameterized version of our model, we find results that resemble what they obtain with disaggregated data for the U.S. economy. We then employ Bayesian methods to estimate the model using aggregate and sectoral data, and find that it accounts extremely well for a wide range of sectoral price facts.

Date: 2010
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Sectoral Price Facts in a Sticky-Price Model (2021)
Working Paper: Sectoral price facts in a sticky-price model (2011)
Working Paper: Sectoral Price Facts in a Sticky-Price Model (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed010:997

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