This paper develops a two-sector dynamic general equilibrium model in which intertemporal fl‡uctuations (and sectoral comovement) are driven by idiosyncratic shocks to relative preferences between consumption goods. This class of shocks may be interpreted as shifts in consumer tastes. When...

We study the impact of R&D and innovation on the use of external numerical flexibility (ENF). R&D and innovation imply both a higher average and a higher volatile productivity. We investigate this ambiguous effect on the firm preference for using ENF in two steps. First, we use a simple model to...