Persistence of business cycles in multisector real business cycle models |
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Authors: | Jess Benhabib Roberto Perli Plutarchos Sakellaris |
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Institution: | Department of Economics, New York University, New York, NY, USA. Email:;Division of Monetary Affairs Federal Reserve Board, Washington, DC, USA.;Department of Economics, Athens University of Economics and Business Athens, Greece. |
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Abstract: | In this paper we explore whether the changing composition of output in response to technology shocks can play a significant role in the propagation of shocks over time. For this purpose we study two multisector real business cycle models, with two and three sectors. We find that, although the two-sector model requires a high intertemporal elasticity of substitution of consumption to match the various dynamic properties of US macroeconomic data, the three-sector model has a strong propagation mechanism under conventional parameterizations, as long as the factor intensities in the three sectors are different enough. |
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Keywords: | real business cycles persistence |
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