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

Katayama, Munechika; Kim, Kwang Hwan

doi:10.1016/j.jmacro.2013.08.018

Cited by 9 publications

(8 citation statements)

References 29 publications

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“…Excluding habit formation in consumption of nondurable goods (red-dashed and dotted line) leads to a considerable larger fall in nondurables and output. In particular, we confirm the results of Katayama and Kim (2013) that including this friction is crucial to obtain hump-shaped responses of nondurables consumption and output that are reasonable in size. Similarly, IACs in durable goods are crucial to account for plausible magnitudes of the responses of durables and output.…”

Section: Models Comparisonsupporting

confidence: 83%

“…As a result, they need to introduce imperfect capital mobility and variable capital utilization for their model to generate the comovement with a reasonable value of the intertemporal elasticity of substitution between consumption and labour. Building on this model, Katayama and Kim (2013) check whether habit formation in nondurable consumption and investment adjustment costs generate hump-shaped responses. However, the Bayesian estimation shows that it is the combination of habit, investment adjustment costs and sticky wages that delivers hump-shaped impulse responses.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Other authors Fuerst, 2006, 2010;Monacelli, 2009;Sterk, 2010;Chen and Liao, 2014) introduce an interest rate rule that responds only to the inflation aggregator. Similarly to recent contributions (Junhee, 2009;Tsai, 2010;Di Pace and Hertweck, 2012;Auray et al, 2013;Kim and Katayama, 2013;Katayama and Kim, 2013), we set a Taylor-type rule featuring interest rate smoothing and responses to inflation and output as widely common in estimated DSGE models.…”

Section: Fiscal and Monetary Policymentioning

confidence: 99%

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Monetary policy and the relative price of durable goods

Cantelmo

Melina

2018

Journal of Economic Dynamics and Control

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In a VAR model of the US, the response of the relative price of durables to a monetary contraction is either flat or mildly positive. It significantly falls only if narrowly defined as the ratio between new house and nondurables prices. These findings survive three identification strategies and across subsamples. Then, they are rationalized via the estimation of a two-sector New-Keynesian model. Here, the degree of overall durables price stickiness is not dramatically lower than that of nondurables. Such macroeconometric results are close to recent microeconometric evidence. Moreover, they suggest that monetary policy is not very distortive of sectoral allocations. JEL-Code: E520, E320. Terms of use: Documents inKeywords: monetary policy, durables, nondurables, comovement, relative price, DSGE, Bayesian estimation, SVAR, sign restrictions, narrative approach. Alessandro Cantelmo Department of Economics

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Section: Models Comparisonsupporting

confidence: 83%

Section: Literature Reviewmentioning

confidence: 99%

Section: Fiscal and Monetary Policymentioning

confidence: 99%

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Monetary policy and the relative price of durable goods

Cantelmo

Melina

2018

Journal of Economic Dynamics and Control

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“…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%

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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“…In a similar vein, DiCecio (2009) shows that nominal wage rigidities in a New Keynesian model featuring consumption and investment producing sectors can address the co-movement puzzle. Katayama and Kim (2013) and Dey and Tsai (2017) demonstrate that adopting particular preference specifications can help to generate co-movement between expenditure categories. 5 Another strand of the literature puts emphasis on demand-side collateral constraints in two-sector economies featuring durable and non-durable production (see e.g.…”

Section: Introductionmentioning

confidence: 99%

Sectoral Comovement, Monetary Policy and the Credit Channel

Pace

Görtz

2021

SSRN Journal

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Using a structural vector autoregression, we document that a contractionary monetary policy shock triggers a decline in durable and non-durable outputs as well as a contraction in bank equity and a rise in the excess bond premium. The latter points to an important transmission channel of monetary policy via financial markets. It has long been recognized that a standard two-sector New Keynesian model, where durable goods prices are flexible and non-durable and services sticky, does not generate the empirically observed sectoral comovement across expenditure categories in response to a monetary policy shock. We show that introducing financial frictions in a two-sector New Keynesian model can resolve its disconnect with the empirical evidence: a monetary tightening generates not only comovement, but also a rise in credit spreads and a deterioration in bank equity.

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

Cited by 9 publications

References 29 publications

Monetary policy and the relative price of durable goods

Monetary policy and the relative price of durable goods

Intersectoral Labor Immobility, Sectoral Comovement, and News Shocks

Sectoral Comovement, Monetary Policy and the Credit Channel

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