We argue that nonhomothetic preferences with habit formation in nondurable and durable consumption can be a driving force behind sectoral comovement in production. We make this point by augmenting a two-sector New Keyesian model a la Barsky, House and Kimball (2007) with these two real features...

A large body of evidence links financial development to economic growth, yet the channels through which inflation affects this relationship and its stability have been less thoroughly explored. We take an econometric and graphical approach to analyzing these channels, and find that higher levels...