Durable Goods and Sectoral Effects of Monetary Policy

Abstract

High degree of interest sensitivity of durable goods is now a stylized fact in the literature of monetary policy. This literature, however, does not provide a clear and consensual explanation for the modalities of this stylized fact. In this paper, two independent empirical models are performed to shed more light on the cross-sectoral impacts of monetary policy. The results of first study indicate that there is no straightforward qualitative relationship between the degree of durability and the interest-sensitivity of durables. While, the second study shows that, in response to monetary policy shocks, productive durables behave differently from consumer durables. For both studies, two models have been estimated using the quarterly data of the U.S. over the period 1954:III – 2007:II<br /> <strong>JEL Classification:</strong> E52, L68.