Showing 1 - 10 of 135
The lumpy nature of plant-level investment is generally not taken into account in the context of monetary theory (see, e.g., Christiano et al. 2005 and Woodford 2005). We formulate a generalized (S,s) pricing and investment model which is empirically more plausible along that dimension....
Persistent link: https://www.econbiz.de/10010293991
Once New Keynesian (NK) theory (see, e.g., Woodford 2003) is combined with a standard model of investment (see, e.g., Thomas 2002), the resulting framework loses its ability to generate a realistic monetary transmission mechanism. This is the puzzle uncovered in Reiter et al. (2013). The simple...
Persistent link: https://www.econbiz.de/10011655358
Standard (S,s) models of lumpy investment allow us to match many aspects of the micro data, but it is well known that the implied interest rate sensitivity of investment is unrealistically large. The monetary transmission mechanism is therefore a particularly clean experiment to assess the...
Persistent link: https://www.econbiz.de/10012233943
We discuss some difficulties in a dynamic New-Keynesian model with staggered price setting à la Calvo and a convex capital adjustment cost at the firm level, as considered by Woodford (2003, Ch. 5). It is shown that the implied simultaneous price setting and investment decision has not been...
Persistent link: https://www.econbiz.de/10012143615
We model capital accumulation in a dynamic New-Keynesian model with staggered price setting à la Calvo. It is assumed that firms do not have access to a rental market for capital. We compare our model with an alternative specification where households accumulate capital and rent it to firms....
Persistent link: https://www.econbiz.de/10012143617
According to the Taylor principle a central bank should adjust the nominal interest rate by more than one for one in response to changes in current inflation. Most of the existing literature supports the view that by following this simple recommendation a central bank can avoid being a source of...
Persistent link: https://www.econbiz.de/10012143626
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...
Persistent link: https://www.econbiz.de/10012143642
What are the consequences for monetary policy design implied by the fact that price setting and investment takes typically place simultaneously at the firm level? To address this question we analyze simple (constrained) optimal interest rate rules in the context of a dynamic New Keynesian model...
Persistent link: https://www.econbiz.de/10012143656
In the presence of firm-specific capital the Taylor principle can generate multiple equilibria. Sveen and Weinke (2005b) obtain that result in the context of a Calvo-style sticky price model. One potential criticism is that the price stickiness which is needed for our theoretical result to be...
Persistent link: https://www.econbiz.de/10012143658
The lumpy nature of plant-level investment is generally not taken into account in the context of monetary theory (see, e.g., Christiano et al. 2005 and Woodford 2005). We formulate a generalized (S,s) pricing and investment model which is empirically more plausible along that dimension....
Persistent link: https://www.econbiz.de/10012143710