American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Sectoral Price Facts in a Sticky-Price Model
American Economic Journal: Macroeconomics
vol. 13,
no. 1, January 2021
(pp. 216–56)
Abstract
We develop a multisector sticky-price DSGE model that can endogenously deliver differential responses of prices to aggregate and sectoral shocks. Input-output production linkages and a (standard) monetary policy rule contribute to a slow response of prices to aggregate shocks. In turn, labor market segmentation at the sectoral level induces within-sector strategic substitutability in price-setting decisions, 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 United States and find that it accounts well for a range of sectoral price facts.Citation
Carvalho, Carlos, Jae Won Lee, and Woong Yong Park. 2021. "Sectoral Price Facts in a Sticky-Price Model." American Economic Journal: Macroeconomics 13 (1): 216–56. DOI: 10.1257/mac.20190205Additional Materials
JEL Classification
- E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian
- E21 Macroeconomics: Consumption; Saving; Wealth
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy