Price Rigidity and the Origins af Aggregate Fluctuations

Arbeitspapier

We document a novel role of heterogeneity in price rigidity: It strongly amplifies the capacity of idiosyncratic shocks to drive aggregate fluctuations. Heterogeneity in price rigidity also completely changes the identity of sectors from which fluctuations originate. We show these results both theoretically and empirically through the lens of a multi-sector model featuring heterogeneous GDP shares, input-output linkages, and idiosyncratic productivity shocks. Quantitatively, we calibrate our model to 341 sectors and find sectoral productivity shocks can give rise to aggregate fluctuations that are half as large as those arising from an aggregate productivity shock. Heterogeneous price rigidity amplifies the aggregate fluctuations by a factor of more than 2 relative to a flexible-price or homogeneous sticky price economy. Hence, idiosyncratic shocks and heterogeneous price rigidity can account for large parts of aggregate fluctuations and there is hope we will not “forever remain ignorant of the fundamental causes of economic fluctuations” (Cochrane (1994)).

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 7190

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Price Level; Inflation; Deflation ; Business Fluctuations; Cycles ; Economic Growth and Aggregate Productivity: General
• Thema: input-output linkages ; nominal price rigidity ; idiosyncratic shocks

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Pasten, Ernesto ; Schoenle, Raphael S. ; Weber, Michael
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2018

Weitere Informationen

• Handle: http://hdl.handle.net/10419/185388
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ