Is Lumpy Investment Really Irrelevant for the Business Cycle?
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http://hdl.handle.net/11250/2498440Utgivelsesdato
2005Metadata
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Smoothness in aggregate capital accumulation is a necessary condition for New-Keynesian (NK) models to imply a quantitatively relevant monetary transmission mechanism (see, e.g., Woodford 2005). Can that aggregate smoothness be entertained in the context of an NK model featuring lumpy plant-level investment? Our answer is yes. Imperfect competition in goods markets and/or sticky prices are identified as economic mechanisms which render lumpy investment relevant in general equilibrium.