English, Article, Journal or magazine article edition: Is Lumpy Investment really Irrelevant for the Business Cycle? Tommy Sveen; Lutz Weinke

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Bookmark: http://trove.nla.gov.au/version/154218
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Is lumpy investment really irrelevant for the business cycle?
Author
  • Tommy Sveen
  • Lutz Weinke
Physical Description
  • preprint
Notes
  • RePEc:upf:upfgen:869
  • New-Keynesian (NK) models can only account for the dynamic effects of monetary policy shocks if it is assumed that aggregate capital accumulation is much smoother than it would be the case under frictionless firm-level investment, as discussed in Woodford (2003, Ch. 5). We find that lumpy investment, when combined with price stickiness and market power of firms, can rationalize this assumption. Our main result is in stark contrast with the conclusions obtained by Thomas (2002) in the context of a real business cycle (RBC) model. We use our model to explain the economic mechanism behind this difference in the predictions of RBC and NK theory.
  • Lumpy investment, Sticky prices
  • RePEc:bno:worpap:2005_06
Language
  • English
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