Labour Market Frictions, Monetary Policy, and Durable Goods

Di Pace, Federico and Hertweck, Matthias Sebastian. (2012) Labour Market Frictions, Monetary Policy, and Durable Goods. Working Paper Series of the Department of Economics, 2012 (09).

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The standard two-sector monetary business cycle model suffers from an important deficiency. Since durable good prices are more flexible than non-durable good prices, optimising households build up the stock of durable goods at low cost after a monetary contraction. Consequently, sectoral outputs move in opposite directions. This paper finds that labour market frictions help to understand the so-called sectoral “comovement puzzle”. Our benchmark model with staggered Right-to-Manage wage bargaining closely matches the empirical elasticities of output, employment and hours per worker across sectors. The model with Nash bargaining, in contrast, predicts that firms adjust employment exclusively along the extensive margin.
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Professuren Wirtschaftswissenschaften > Wirtschaftstheorie (Berentsen)
UniBasel Contributors:Hertweck, Matthias S
Item Type:Working Paper
Publisher:University of Konstanz
Number of Pages:33
Note:Publication type according to Uni Basel Research Database: Discussion paper / Internet publication
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Last Modified:15 Mar 2018 11:15
Deposited On:15 Mar 2018 11:15

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