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The real business cycle: intermediate inputs and sectoral comovement

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  • Andreas Hornstein
  • Jack Praschnik

Abstract

We describe the postwar U.S. business cycle for the durable and nondurable goods producing sector. The business cycle is characterized by positive comovement of output, employment, and investment across the two sectors. We develop a two sector growth model to explain the observed pattern of comovements, and suggest that intermediate inputs produced by the nondurable goods sector for the durable goods sector play a crucial role.

Suggested Citation

  • Andreas Hornstein & Jack Praschnik, 1994. "The real business cycle: intermediate inputs and sectoral comovement," Discussion Paper / Institute for Empirical Macroeconomics 89, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmem:89
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    Cited by:

    1. Huffman, Gregory W. & Wynne, Mark A., 1999. "The role of intratemporal adjustment costs in a multisector economy," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 317-350, April.
    2. Hornstein, Andreas & Praschnik, Jack, 1997. "Intermediate inputs and sectoral comovement in the business cycle," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 573-595, December.
    3. George Verikios, 2017. "The importance of periodicity in modelling infectious disease outbreaks," Discussion Papers in Economics economics:201711, Griffith University, Department of Accounting, Finance and Economics.

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    Business cycles;

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