Approximating multisector New Keynesian models

Economics Letters V 163, P 193-196, 2018

Carlos Viana de Carvalho, Fernanda Feitosa Nechio.

A three-sector model with a suitably chosen distribution of price stickiness can closely approximate the response to aggregate shocks of New Keynesian models with a much larger number of sectors, allowing for their estimation at much reduced computational cost.

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