Price Rigidities and the Granular Origins of Aggregate Fluctuations

Arbeitspapier

We study the aggregate implications of sectoral shocks in a multi-sector New Keynesian model featuring sectoral heterogeneity in price stickiness, sector size, and input-output linkages. We calibrate a 341 sector version of the model to the United States. Both theoretically and empirically, sectoral heterogeneity in price rigidity (i) generates sizable GDP volatility from sectoral shocks, (ii) amplifies both the "granular" and the "network" effects, (iii) alters the identity and relative contributions of the most important sectors for aggregate fluctuations, (iv) can change the sign of fluctuations, (v) invalidates the Hulten (1978) Theorem, and (vi) generates a "frictional" origin of aggregate fluctuations.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6619

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; Economic Growth and Aggregate Productivity: General
• Subject: input-output linkages ; sticky prices ; idiosyncratic shocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pasten, Ernesto ; Schoenle, Raphael S. ; Weber, Michael
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/171083
• Last update: 10.03.2025, 11:44 AM CET