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The Real Business Cycle: Intermediate Inputs and Sectoral Comovement

Discussion Paper 89 | Published March 1, 1994

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Authors

Andreas Hornstein

Jack Praschnik

The Real Business Cycle: Intermediate Inputs and Sectoral Comovement

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.