@article{7a7e2769581e41e087d2fc63d819a17b,
title = "Interpreting shocks to the relative price of investment with a two-sector model",
abstract = "Consumption and investment comove over the business cycle in response to shocks that permanently move the price of investment. The interpretation of these shocks has relied on standard one-sector models or on models with two or more sectors that can be aggregated. We show that the same interpretation can also be motivated with a model that captures key features of the US Input–Output Tables and cannot be aggregated into a standard one-sector model. Our alternative model yields a closer match to the empirical evidence of positive comovement for consumption and investment subject shocks that permanently move the price of investment.",
author = "Luca Guerrieri and Dale Henderson and Jinill Kim",
note = "Funding Information: The views expressed in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. Jinill Kim acknowledges that his work was supported by a Korea University Grant (K1910621) and by the National Research Foundation of Korea Grant. The authors have no conflict of interest related to the work presented in this article. We are grateful to Christopher Gust for many useful conversations. We are also indebted to Jonathan Wright (our Editor), and to Susanto Basu, John Fernald, Jonas Fisher, and Miles Kimball. Replication codes are available from: http://www.lguerrieri.com/rep_codes_1018.zip. Funding Information: The views expressed in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System. Jinill Kim acknowledges that his work was supported by a Korea University Grant (K1910621) and by the National Research Foundation of Korea Grant. The authors have no conflict of interest related to the work presented in this article. We are grateful to Christopher Gust for many useful conversations. We are also indebted to Jonathan Wright (our Editor), and to Susanto Basu, John Fernald, Jonas Fisher, and Miles Kimball. Replication codes are available from: http://www.lguerrieri.com/rep_codes_1018.zip . Publisher Copyright: {\textcopyright} 2019 John Wiley & Sons, Ltd.",
year = "2020",
month = jan,
day = "1",
doi = "10.1002/jae.2728",
language = "English",
volume = "35",
pages = "82--98",
journal = "Journal of Applied Econometrics",
issn = "0883-7252",
publisher = "John Wiley and Sons Ltd",
number = "1",
}