Lee E. Ohanian and Alan C. Stockman
The effects of monetary disturbances differ across sectors when some prices can adjust more rapidly than others. In a model economy with two sectors possessing different speeds of price adjustment, monetary shocks generate inverse movements of real interest rates, alter relative prices, and generate sectoral reallocations of labor. Factors such as the willingness of households to substitute goods across sectors and over time affect the economy's response.
Amanda L. Kramer
To receive a notification by email when Economic Quarterly is posted online or to order single copies of past issues, click on the links below (published online only since 2012).