Strong procyclical fluctuations in the durable production are the most prominent feature of the empirical response to monetary shocks. This paper investigates the role of preferences in matching this feature of the data in a two-sector sticky price model with flexibly priced durables. The...

A key feature of the business cycle data is that output, employment and investment move up and down together in dierent sectors of the economy. However, standard business cycle models fail to generate this business cycle sectoral co-movement. In this paper we propose a two-sector business cycle...

This paper resolves the sectoral comovement problem between nondurable and durable outputs that arises in response to a monetary shock in a two-sector sticky price model with flexibly priced durable goods. We analytically demonstrate that the non-separability between aggregate consumption and...