Journal
MACROECONOMIC DYNAMICS
Volume 18, Issue 6, Pages 1209-1233Publisher
CAMBRIDGE UNIV PRESS
DOI: 10.1017/S1365100512000910
Keywords
Depreciation Shocks; Investment-Specific Technology Shocks; Nominal Rigidities; Co-movement
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Funding
- ESRC [ES/L500343/1] Funding Source: UKRI
- Economic and Social Research Council [ES/L500343/1] Funding Source: researchfish
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In this paper we study the transmission of capital depreciation shocks. The existing literature in the real business cycle tradition has concluded that these shocks are irrelevant to business cycle fluctuations. We show that they are potentially important drivers of aggregate fluctuations in a new Keynesian model. Nominal rigidities and some persistence in the shock process are the key ingredients that generate co-movement across real variables.
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