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Federal Reserve Bank of San Francisco, Working Paper Series
This paper demonstrates that sectoral heterogeneity itself-without any additional bells or whistles-has first-order implications for the transmission of aggregate shocks to aggregate variables in an otherwise standard DSGE model. The effects of sectoral heterogeneity on this transmission are decomposed into two channels: a "relative price" channel and a "relative productivity" channel. The relative price channel results from changes in the relative prices of aggregates, such as investmentdoi:10.24148/wp2006-20 fatcat:53smc4ciw5arzohpin44qwpypq