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    Revisiting the comovement puzzle: the input-output structure as an additional solution

    Di Pace, Federico (2008) Revisiting the comovement puzzle: the input-output structure as an additional solution. Working Paper. Birkbeck College, University of London, London, UK.

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    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.

    Metadata

    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 0807
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 09 Jul 2013 07:08
    Last Modified: 09 Jul 2013 07:13
    URI: http://eprints.bbk.ac.uk/id/eprint/7589

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