THE TRANSMISSION OF MONETARY POLICY IN A MULTISECTOR ECONOMY* |
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| Authors: | Hafedh Bouakez Emanuela Cardia Francisco J. Ruge‐Murcia |
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| Affiliation: | 1. HEC Montréal and CIRPéE, Canada;2. Département de sciences économiques and CIREQ, Université de Montréal, Canada;3. We have received helpful comments from Rui Castro, Juan Dolado, Fabio Ghironi, Emi Nakamura, Frank Schorfheide, Gregor Smith, and anonymous referees. We also thank seminar participants at several institutions and conferences for useful discussions. Financial support from the Social Sciences and Humanities Research Council of Canada and the Fonds québécois de la recherche sur la société et la culture is gratefully acknowledged. Please address correspondence to: Francisco J. Ruge‐Murcia, Département de sciences économiques, Université de Montréal, C.P. 6128, succursale Centre‐ville, Montréal (Québec) H3C 3J7, Canada. Phone: 514‐343‐2396. Fax: 514‐343‐5831. E‐mail: . |
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| Abstract: | This article constructs and estimates a sticky‐price, Dynamic Stochastic General Equilibrium model with heterogeneous production sectors. Firms in different sectors vary in their price rigidity, production technology, and the combination of material and investment inputs. In particular, firms buy inputs from all sectors using the actual Input–Output Matrix and Capital Flow Table of the U.S. economy. By relaxing the standard assumption of symmetry, this model allows idiosyncratic sectoral dynamics in response to monetary policy shocks. The model is estimated by the Generalized Method of Moments using sectoral and aggregate U.S. time series. |
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