Labour Market Frictions, Monetary Policy, and Durable Goods

Konferenzbeitrag

The standard two-sector monetary business cycle model suffers from an important deficiency. Since durable good prices are more flexible than non-durable good prices, optimising households build up the stock of durable goods at low cost after a monetary contraction. Consequently, sectoral outputs move in opposite directions. This paper finds that labour market frictions help to understand the so-called sectoral "comovement puzzle". Our benchmark model with staggered Right-to-Manage wage bargaining closely matches the empirical elasticities of output, employment and hours per worker across sectors. The model with Nash bargaining, in contrast, predicts that firms adjust employment exclusively along the extensive margin.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2012: Neue Wege und Herausforderungen für den Arbeitsmarkt des 21. Jahrhunderts - Session: Monetary Policy and Financial Markets ; No. E14-V2

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Macroeconomics: Production ; Price Level; Inflation; Deflation ; Monetary Policy
• Subject: durable production ; labour market frictions ; sectoral comovement ; monetary policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Di Pace, Federico ; Hertweck, Matthias S.
• Event: Veröffentlichung
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/62052
• Last update: 10.03.2025, 11:41 AM CET