sticky prices and comovement of business cycle

A defining characteristic of business cycle is comovements of economic variables across sectors. But it is not easy to replicate these comovements in standard real business cycle models. Traditionally, however, not only the productivity shocks emphasized in real business cycle models but also monetary shocks have been believed to be important in explaining business cycles . Following this tradition, a two sector sticky price model is constructed in this paper to examine the sectoral comovements of economic variables under nominal rigidities. It turns out that monetary shocks can generate comovements of sectoral variablcomovement over business cycles, sticky prices, sticky wages

Nature of Oil Price Shocks and Monetary Policy

We investigate the nature of oil price shocks to the Korean economy in recent years and find that the recent hike in oil price is induced by the increase in oil demand in contrast to the previous years when oil price run-up is mostly from supply disruptions. We also study how monetary responses to oil price shocks affect economic stability and find that an accommodative policy yields more stable outcomes.