Non-separability and sectoral comovement in a sticky price model

Kim, Kwang Hwan; Katayama, Munechika

doi:10.1016/j.jedc.2013.04.012

Cited by 22 publications

(32 citation statements)

References 24 publications

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“…The posterior mean of σ is estimated to be 0.70, so that the degree of nonseparability in the utility function is moderate. Our estimate of the degree of the nonseparability is smaller than that reported in Kim and Katayama () and closer to the estimates of Smets and Wouters () and Fujiwara, Hirose, and Shintani (). The estimate of the posterior mean of

1 / η

is 0.80, implying that the Frisch elasticity of labor supply is about 1.25.…”

Section: Estimationsupporting

confidence: 85%

“…We use a Beta distribution for σ with mean 0.5 and standard deviation of 0.2. This prior mean is much more conservative than the posterior mean obtained in the two‐sector model of Kim and Katayama () and the nonseparability parameter found in Guerron‐Quintana (). Based on the prior distributions of

1 / η

1 / θ

, and σ, in the absence of internal habit formation, the implied prior probability of satisfying the normality condition is about 89% and that of satisfying the sectoral comovement condition is roughly 73%.…”

Section: Estimationmentioning

confidence: 59%

“…In this study, we use the following specific form of the King–Plosser–Rebelo utility function:

U false(C_{t} - h C_{t - 1}, N_{t} false) = \frac{{(C_{t} - h C_{t - 1})}^{1 - \frac{1}{σ}} {(() 1 + (\frac{1}{σ} - 1) v false(N_{t} false))}^{\frac{1}{σ}} - 1}{1 - \frac{1}{σ}}, σ \leq 1,

where

v false(N_{t} false) = ϕ \frac{η}{1 + η} {N_{t}}^{\frac{1 + η}{η}} .

This class of the King–Plosser–Rebelo utility function is also used in Basu and Kimball (), Shimer (), Kim and Katayama (), and Katayama and Kim (). The term

v (N_{t})

measures the disutility incurred from hours worked, with

v^{^{'}} > 0

v^{''} > 0

.…”

Section: The Modelmentioning

confidence: 99%

See 2 more Smart Citations

Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

Katayama¹,

Kim

2018

J of Money Credit Banking

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Sectoral comovement of output and hours worked is a prominent feature of business cycle data. However, most two-sector neoclassical models fail to generate this sectoral comovement. We construct and estimate a two-sector neoclassical Dynamic Stochastic General Equilibrium (DGSE) model generating sectoral comovement in response to both anticipated and unanticipated shocks. The key to our model's success is a significant degree of intersectoral labor immobility, which we estimate using data on sectoral hours worked. Furthermore, we demonstrate that imperfect intersectoral labor mobility provides a better explanation for the sectoral comovement than an alternative model emphasizing the role of labor-supply wealth effects.JEL codes: E13, E32

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1 / η

is 0.80, implying that the Frisch elasticity of labor supply is about 1.25.…”

Section: Estimationsupporting

confidence: 85%

1 / η

1 / θ

Section: Estimationmentioning

confidence: 59%

“…In this study, we use the following specific form of the King–Plosser–Rebelo utility function:

U false(C_{t} - h C_{t - 1}, N_{t} false) = \frac{{(C_{t} - h C_{t - 1})}^{1 - \frac{1}{σ}} {(() 1 + (\frac{1}{σ} - 1) v false(N_{t} false))}^{\frac{1}{σ}} - 1}{1 - \frac{1}{σ}}, σ \leq 1,

where

v false(N_{t} false) = ϕ \frac{η}{1 + η} {N_{t}}^{\frac{1 + η}{η}} .

This class of the King–Plosser–Rebelo utility function is also used in Basu and Kimball (), Shimer (), Kim and Katayama (), and Katayama and Kim (). The term

v (N_{t})

measures the disutility incurred from hours worked, with

v^{^{'}} > 0

v^{''} > 0

.…”

Section: The Modelmentioning

confidence: 99%

See 1 more Smart Citation

Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

Katayama¹,

Kim

2018

J of Money Credit Banking

Self Cite

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“…Second, most homes are priced for the first time when they are sold. Kim and Katayama (2013) also find that flexible durable prices are supported by the data in their estimated two-sector New Keynesian model. This paper seeks to uncover the source of the gradual hump-shaped response of non-durable and durable spending to a monetary shock in a two-sector New Keynesian model where non-durable prices are sticky and durable goods are flexibly priced.…”

Section: Introductionmentioning

confidence: 73%

The delayed effects of monetary shocks in a two-sector New Keynesian model

Katayama

Kim

2013

Journal of Macroeconomics

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This paper studies a two-sector New Keynesian model that captures the hump-shaped response of non-durable and durable spending to a monetary shock when non-durable prices are sticky and durable goods are flexibly priced. Based on the estimated parameters, we show that habit formation and investment adjustment costs are not sufficient to generate the gradual response of non-durable and durable spending in this setup. We find that nominal wage rigidity and non-separable preferences between consumption and labor are also necessary to delay the peak response of non-durable and durable spending in the estimated two-sector New Keynesian model.

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“…Finally, the third mechanism includes preference-related contributions to resolve the co-movement problem. Kim and Katayama (2010) examined the implications for sectoral co-movement of the non-separability between consumption and leisure, imperfect capital mobility, and variable capacity utilization. Huang et al (2013) resolved the co-movement problem by exploring the dynamic interaction between habit formation and non-homothetic preferences on durable and non-durable consumption goods, of which the former weakens the role of the substitution effect and the latter enhances the role of the income effect in shaping the composition of preferred consumption bundles.…”

Section: Introductionmentioning

confidence: 99%

Capital, credit constraints and the comovement between consumer durables and nondurables

Chen

Liao

2014

Journal of Economic Dynamics and Control

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Evidence indicates that consumer durables are more flexibly priced than nondurable goods and services. In otherwise standard two-sector neoclassical sticky-price models with flexible durable prices, following monetary tightening, nondurables decrease but consumer durables increase. Friction in lending between households can resolve the comovement problem if durable prices are sticky. However, if durable prices are flexible, friction in lending fails to generate joint decline. This paper resolves the co-movement problem by adding capital into a model with flexible durable prices and friction in lending. When capital is needed in production, monetary tightening reduces the relative price of durables which induces investment and decreases firms' real profits in the short run. Due to fewer profits remitted from firms, savers have a lower disposable income and cannot increase expenditures on consumer durables as much as otherwise. As a consequence, aggregate consumer durables decrease and there is a joint decline of nondurables and consumer durables.

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Non-separability and sectoral comovement in a sticky price model

Cited by 22 publications

References 24 publications

Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

The delayed effects of monetary shocks in a two-sector New Keynesian model

Capital, credit constraints and the comovement between consumer durables and nondurables

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