Sectoral Price Facts in a Sticky-Price Model

Carlos Carvalho and Jae Won Lee

Departmental Working Papers from Rutgers University, Department of Economics

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, input-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. We estimate the model using aggregate and sectoral price and quantity data for the U.S., and find that it accounts extremely well for a range of sectoral price facts.

Keywords: heterogeneity; price stickiness; sectoral data; FAVAR; sectoral shocks (search for similar items in EconPapers)
JEL-codes: E30 E31 E32 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2011-11-04
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 (26)

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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 (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:201133

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