Durable Goods and Energy in RBC : An Endogenous Multisectoral Model

We have constructed a RBC model where energy is endogenously minded. It is generated within the model from fossil intermediate and renewable energy resources and consumed by final good production and households. Furthermore, households can invest in a durable good to avoid exaggerated disruptive investment dynamics. By estimating the model using Bayesian techniques and with data from the German economy, we find a complementary relationship between durable goods and energy consumption in the household sector as well as between physical capital and energy consumption in the final good sector.Furthermore, a TFP shock in the (final and intermediate) energy sectors has a larger effect on durable good purchases than on capital investments in the final good production. Nevertheless, even with endogenous price determination of energy, TFP in final good production is still the major contributor to business cycle formation in a classical framework. In an extension, we show that despite of allowing the replenish the constrained fossil stock, the dynamic responds of the variables do not deviate from the baseline model