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 
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.
show moreshow less

Download full text files

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

    Share in Twitter Search Google Scholar
Metadaten
Author:Fabio Verona
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:Univ.-Bibliothek Frankfurt am Main
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.
Institutes: Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:D83 Search; Learning; Information and Knowledge; Communication; Belief
E10 General
E22 Capital; Investment; Capacity
E32 Business Fluctuations; Cycles
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

$Rev: 11761 $