Monetary Policy with Sectoral Trade-Offs

Ivan Petrella, Raffaele Rossi, Emiliano Santoro*

*Autore corrispondente per questo lavoro

Risultato della ricerca: Contributo in rivistaArticolo in rivista

Abstract

We formulate a two-sector New Keynesian economy featuring sectoral heterogeneity along three dimensions: price stickiness, consumption goods durability, and the usage of input materials in production. These factors affect both inter-sectoral and intra-sectoral stabilization. We examine the welfare properties of simple rules that react to alternative measures of final goods price inflation. Due to factor demand linkages, the cost of production in one sector is influenced by price-setting in the other sector. Therefore, measures of aggregate inflation weighting sectoral prices based on their relative stickiness do not allow one to keep track of the effective speeds of sectoral price adjustment.
Lingua originaleEnglish
pagine (da-a)55-88
Numero di pagine34
RivistaScandinavian Journal of Economics
Volume121
DOI
Stato di pubblicazionePubblicato - 2019

Keywords

  • Input-output interactions
  • interest-rate rules
  • sectoral heterogeneity

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