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Revisiting the comovement puzzle : the input-output structure as an additional solution
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Di Pace, Federico (2008) Revisiting the comovement puzzle : the input-output structure as an additional solution. Working Paper. London: Department of Economics, Mathematics and Statistics, Birkbeck. Birkbeck Working Papers in Economics and Finance (No.0807). (Unpublished)
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Official URL: http://www.ems.bbk.ac.uk/research/wp/2008/0807
Abstract
We propose an additional solution to the comovement puzzle by developing a two-sector monetary model with housing production and an input-output structure. The model generates comovement between consumption and residential investment for large range of shocks hitting the economy. Consistent with previous work, we find that our model produces highly persistence responses in aggregate consumption, aggregate output and residential investment. We show that the results are highly robust to different policy rule specifications. We find that the lower the labour shares, the higher the relative volatility of residential investment. The model with an IO structure is works under different specifications of the period utility function. We extend the model to allow for wage rigidities and show that our proposed solution can perfectly work alongside previous ones.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Series Name: | Birkbeck Working Papers in Economics and Finance | ||||
Publisher: | Department of Economics, Mathematics and Statistics, Birkbeck | ||||
Place of Publication: | London | ||||
Official Date: | September 2008 | ||||
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Number: | No.0807 | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Unpublished | ||||
Access rights to Published version: | Open Access (Creative Commons) |
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