Firm-Specific Capital, Nominal Rigidities and the Business Cycle

David Altig, Lawrence Christiano, Martin Eichenbaum and Jesper Lindé

No 176, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and predetermined within a period.

Keywords: Technology shocks; Firm-specific capital; Monetary policy; Nominal rigidities; Real rigidities; Business cycles (search for similar items in EconPapers)
JEL-codes: E30 E40 E50 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2004-12-01
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (111)

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Related works:
Journal Article: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2011)
Working Paper: Firm-specific capital, nominal rigidities and the business cycle (2010)
Working Paper: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2005)
Working Paper: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2005)
Working Paper: Firm-specific capital, nominal rigidities, and the business cycle (2004)
Working Paper: Firm-specific capital, nominal rigidities and the business cycle (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0176

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