Approximating Multisector New Keynesian Models


Carlos Carvalho

Download PDF
(695 KB)

2017-12 | September 1, 2017

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.

Supplemental Appendix (PDF, 1MB)

Article Citation

Carvalho, Carlos, and Fernanda Nechio. 2017. “Approximating Multisector New Keynesian Models,” Federal Reserve Bank of San Francisco Working Paper 2017-12. Available at

About the Author
Abstract image representing a seat vacancy.
Fernanda Nechio is a vice president in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Fernanda Nechio