Sectoral price facts in a sticky-price model

Arbeitspapier

We develop a multi-sector sticky-price DSGE (dynamic stochastic general equilibrium) model that can endogenously deliver differential responses of prices to aggregate and sectoral shocks. Input-output production linkages induce across-sector pricing complementarities that contribute to a slow response of prices to aggregate shocks. In turn, input-market segmentation at the sectoral level induces within-sector pricing substitutability, which helps the model deliver a fast response of prices to sector-specific shocks. Estimating the factor-augmented vector autoregression specification of Boivin, Giannoni, and Mihov (2009) on data generated by a parameterized version of our model, we find results that resemble what they obtain with disaggregated data for the US economy. We then employ Bayesian methods to estimate the model using aggregate and sectoral data, and find that it accounts extremely well for a wide range of sectoral price facts.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Staff Report ; No. 495

Classification and Topics

• Classification: Wirtschaft ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles
• Subject: heterogeneity ; price stickiness ; sectoral data ; FAVAR ; aggregate shocks ; sectoral shocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Carvalho, Carlos ; Lee, Jae Won
• Event: Veröffentlichung
• (who): Federal Reserve Bank of New York
• (where): New York, NY
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/60754
• Last update: 10.03.2025, 11:43 AM CET