Do Multisectoral New Keynesian Models Match Sectoral Data?
Recent papers studying the consequences of introducing production networks and sectoral heterogeneity into macroeconomic models with nominal rigidities show that adding these features to an otherwise standard New Keynesian model has important consequences for the sources of macroeconomic fluctuations and for the effectiveness and design of stabilization policies. While those papers’ analyses are mostly theoretical, several recent studies assess the empirical properties of this class of models. These studies mostly focus on the aggregate properties of the multisectoral models and emphasize that production networks and producer heterogeneity can significantly amplify the effects of macroeconomic shocks or that sectoral shocks can contribute to aggregate fluctuations. This paper instead looks at how well multisectoral New Keynesian models can match some empirical properties of sectoral prices and quantities. The authors focus on higher moments of the inflation and consumption growth distributions and on the contemporaneous comovement of these two variables.