Monetary Policy and the Relative Price of Durable Goods

55 Pages Posted: 7 May 2015

Multiple version iconThere are 2 versions of this paper

Date Written: April 30, 2015


In a VAR model of the US, the response of the relative price of durables to a monetary contraction is either flat or mildly positive. It significantly falls only if narrowly defined as the ratio between new house and nondurables prices. These findings survive three identification strategies and across subsamples. Then, they are rationalized via the estimation of a two-sector New-Keynesian model. Here, the degree of overall durables price stickiness is not dramatically lower than that of nondurables. Such macroeconometric results are close to recent microeconometric evidence. Moreover, they suggest that monetary policy is not very distortive of sectoral allocations.

Keywords: monetary policy, durables, nondurables, comovement, relative price, DSGE, Bayesian estimation, SVAR, sign restrictions, narrative approach

JEL Classification: E520, E320

Suggested Citation

Cantelmo, Alessandro and Melina, Giovanni, Monetary Policy and the Relative Price of Durable Goods (April 30, 2015). CESifo Working Paper Series No. 5328, Available at SSRN: or

Alessandro Cantelmo

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184

Giovanni Melina (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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