NEW PERSPECTIVES ON DEPRECIATION SHOCKS AS A SOURCE OF BUSINESS CYCLE FLUCTUATIONS

NEW PERSPECTIVES ON DEPRECIATION SHOCKS AS A SOURCE OF BUSINESS CYCLE FLUCTUATIONS

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 K...

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Veröffentlicht in:Macroeconomic dynamics 2014-09, Vol.18 (6), p.1209-1233
Hauptverfasser: Furlanetto, Francesco, Seneca, Martin
Format: Artikel
Sprache:eng
Schlagworte:
Business cycles
Capital depreciation
Central banks
Consumption
Costs
Economic models
Economic theory
Elasticity of demand
Households
Investments
Macroeconomics
Monopolistic competition
Studies
Variables
Wage rates
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Zusammenfassung: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.
ISSN:1365-1005
1469-8056
DOI:10.1017/S1365100512000910