Durable Goods, Inter-Sectoral Linkages and Monetary Policy

CIRPEE Working Paper No. 08-21

27 Pages Posted: 20 Oct 2008

See all articles by Hafedh Bouakez

Hafedh Bouakez

HEC Montréal

Emanuela Cardia

University of Montreal - Center for Research and Development in Economics

Francisco J. Ruge-Murcia

University of Montreal - Department of Economics; University of Montreal - Center for Interuniversity Research in Econometrics

Date Written: September 11, 2008

Abstract

Barsky, House and Kimball (2007) show that introducing durable goods into a sticky-price model leads to negative sectoral comovements of production following a monetary policy shock and, under certain conditions, to aggregate neutrality. These results appear to undermine sticky-price models. In this paper, we show that these results are not robust to two prominent and realistic features of the data, namely input-output interactions and limited mobility of productive inputs. When extended to allow for both features, the sticky-price model with durable goods delivers implications in line with VAR evidence on the effects of monetary policy shocks.

Keywords: Durability, input-output interactions, roundabout production, sectoral comovement, monetary policy

JEL Classification: E21, E23, E31, E52

Suggested Citation

Bouakez, Hafedh and Cardia, Emanuela and Ruge-Murcia, Francisco J., Durable Goods, Inter-Sectoral Linkages and Monetary Policy (September 11, 2008). CIRPEE Working Paper No. 08-21. Available at SSRN: https://ssrn.com/abstract=1266650 or http://dx.doi.org/10.2139/ssrn.1266650

Hafedh Bouakez (Contact Author)

HEC Montréal ( email )

3000, chemin de la Côte-Sainte-Catherine
Montréal, Québec H3T 2A7
Canada
1-514-340-7003 (Phone)
1-514-340-6469 (Fax)

Emanuela Cardia

University of Montreal - Center for Research and Development in Economics ( email )

Montreal, Quebec H3T 1B9
Canada

Francisco J. Ruge-Murcia

University of Montreal - Department of Economics ( email )

C.P. 6128, succursale Centre-Ville
Montreal, Quebec H3C 3J7
Canada

University of Montreal - Center for Interuniversity Research in Econometrics ( email )

C.P. 6128, Succursale Centre-ville
Montreal, Quebec H3C 3J7
Canada

Register to save articles to
your library

Register

Paper statistics

Downloads
41
Abstract Views
358
PlumX Metrics