NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ernesto Pastén

Central Bank of Chile
Agustinas 1180
Santiago
Chile

E-Mail: epasten@bcentral.cl
Institutional Affiliations: Central Bank of Chile and Toulouse School of Economics

NBER Working Papers and Publications

November 2018The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy
with Raphael Schoenle, Michael Weber: w25303
We study the transmission of monetary policy shocks in a model in which realistic heterogeneity in price rigidity interacts with heterogeneity in sectoral size and input-output linkages, and derive conditions under which these heterogeneities generate large real effects. Empirically, heterogeneity in the frequency of price adjustment is the most important driver behind large real effects, whereas heterogeneity in input-output linkages contributes only marginally, with differences in consumption shares in between. Heterogeneity in price rigidity further is key in determining which sectors are the most important contributors to the transmission of monetary shocks, and is necessary but not sufficient to generate realistic output correlations. In the model and data, reducing the number of sect...

Published: Ernesto Pasten & Raphael Schoenle & Michael Weber, 2019. "The Propagation of Monetary Policy Shocks in a Heterogeneous Production Economy," Journal of Monetary Economics, .

August 2017Price Rigidity and the Origins of Aggregate Fluctuations
with Raphael Schoenle, Michael Weber: w23750
We document a novel role of heterogeneity in price rigidity: It strongly amplifies the capacity of idiosyncratic shocks to drive aggregate fluctuations. Heterogeneity in price rigidity also completely changes the identity of sectors from which fluctuations originate. We show these results both theoretically and empirically through the lens of a multi-sector model featuring heterogeneous GDP shares, input-output linkages, and idiosyncratic productivity shocks. Quantitatively, we calibrate our model to 341 sectors and find sectoral productivity shocks can give rise to aggregate fluctuations that are half as large as those arising from an aggregate productivity shock. Heterogeneous price rigidity amplifies the aggregate fluctuations by a factor of more than 2 relative to a flexible-price or h...
 
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