THE MICHIGAN STUDY-DISCUSSION PROGRAM, "DEVELOPING HUMAN RESOURCES IN MICHIGAN"

Labor and Human Capital,

Do Flexible Durable Goods Prices Undermine Sticky Price Models?

Multi-sector sticky price models have surprising implications when durable goods have flexible prices. While in actual data the production of virtually all durables exhibits strong negative responses to monetary contractions, in dynamic general equilibrium models a monetary contraction causes the output of flexibly priced durables to expand. Indeed, in the polar case in which only nondurables have sticky prices, the negative comovement of durable and nondurable production exactly offsets and the behavior of aggregate output mimics that of a model with fully flexible prices. While this neutrality' result is special, the comovement problem' -- the perverse response of flexibly priced durables to monetary policy shocks -- is highly robust. When some durables prices are flexible and others sticky, the comovement problem still applies strongly to the subset of durables with flexible prices. We argue that new housing construction might be best characterized as a flexible price industry for which the comovement problem is relevant. The underlying reason for the comovement problem is the combination of a naturally high intertemporal elasticity of substitution for the purchases of durables and temporarily low marginal costs associated with economic contractions.

Sticky Price Models and Durable Goods

This paper shows that there are striking implications that stem from including durable goods in otherwise conventional sticky price models. The behavior of these models depends heavily on whether durable goods are present and whether these goods have sticky prices. If long-lived durables have sticky prices, then even small durables sectors can cause the model to behave as though most prices were sticky. Conversely, if durable goods prices are flexible then the model exhibits unwelcome behavior. Flexibly priced durables contract during periods of economic expansion. The tendency towards negative comovement is very robust and can be so strong as to dominate the aggregate behavior of the model. In an instructive limiting case, money has no effects on aggregate output even though most prices in the model are sticky.Sticky prices, Durables, Comovement, Neutrality

Untitled

In the series Untitled, I have explored common female rituals and interactions that are specific to or pronounced in college aged women. The ways in which young women interact with one another and the activities they engage in have always captivated me. Capturing these unplanned moments reveals the ways in which young women behave and present themselves in both private and public places

Defamation: The Montana Law

Defamation: The Montana La

Dawson: A History of Lay Judges

A Review of A History of Lay Judges . By John P. Dawso