Lumpy investment in sticky information general equilibrium
- In this paper, I introduce lumpy micro-level capital adjustment into a sticky information general equilibrium model. Lumpy adjustment arises because of inattentiveness in capital investment decisions instead of the more common assumption of non-convex adjustment costs. The model features inattentiveness as the only source of stickiness. I find that the model with lumpy investment yields business cycle dynamics which differ substantially from those of an otherwise identical model with frictionless investment and are much more consistent with the empirical evidence. These results therefore strengthen the case in favour of the relevance of microeconomic investment lumpiness for the business cycle.
| Author: | Fabio VeronaORCiD |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-268682 |
| URL: | http://www.imfs-frankfurt.de/fileadmin/user_upload/pdf/WP_55.pdf |
| Parent Title (German): | Working paper series / Institute for Monetary and Financial Stability ; 55 |
| Series (Serial Number): | Working paper series / Institute for Monetary and Financial Stability (55) |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2012 |
| Year of first Publication: | 2012 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2012/11/07 |
| Tag: | business cycle; general equilibrium; lumpy investment; sticky information |
| Note: | This paper is based on a chapter of my PhD dissertation. Part of this paper was written during my traineeship at the ECB's Monetary Policy Strategy Division, whose hospitality I gratefully acknowledge. The first version of this paper was circulated as CEF:UP Working Paper No 2011-02. |
| HeBIS-PPN: | 344384276 |
| Institutes: | Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS) |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
