Sticky Price Models,Durable Goods,and Real Wage Rigidities |
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Authors: | M ALPER ENESIZ LUÍS GUIMARES |
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Institution: | M. ALPER ÇENESIZ,LUÍS GUIMARÃES |
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Abstract: | The standard two‐sector New Keynesian model with durable goods is at odds with conventional wisdom and vector autoregression (VAR) evidence: Following a monetary shock, the model generates (i) either negative or no comovement across sectoral outputs and (ii) aggregate neutrality of money when durable goods' prices are flexible. We reconcile theory with evidence by incorporating real wage rigidities into the standard model: As long as durable goods' prices are more flexible than nondurable goods' prices, we obtain positive sectoral comovement and, thus, aggregate nonneutrality of money. |
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Keywords: | E32 E51 E52 durable goods real wage rigidities comovement money |
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