We estimate a New-Neoclassical Synthesis model of the business cycle with two investment shocks. The first, an … investment-specific technology shock, affects the transformation of consumption into investment goods and is identified with the … relative price of investment. The second shock affects the production of installed capital from investment goods or, more …

We estimate a New-Neoclassical Synthesis model of the business cycle with two investment shocks. The first, an … investment-specific technology shock, affects the transformation of consumption into investment goods and is identified with the … relative price of investment. The second shock affects the production of installed capital from investment goods or, more …

particular focus on the role played by financial frictions and investment dynamics. The paper provides two main contributions …. First, we empirically document that lower investment during financial crises is the key factor leading to permanent loss of … output and total factor productivity (TFP) in the wake of a crisis. Second, we develop a DSGE model with financial frictions …