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New perspectives on depreciation shocks as a source of business cycle fluctuations

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  • Francesco Furlanetto

    (Norges Bank (Central Bank of Norway))

  • Martin Seneca

    () (Norges Bank (Central Bank of Norway))

Abstract

In this paper we study the transmission for capital depreciation shocks. The existing literature in the Real Business Cycle tradition has concluded that these shocks are irrelevant for business cycle fluctuations. We show that these shocks 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 to generate co-movement across real variables.

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Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2011/02.

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Length: 43 pages
Date of creation: 25 Mar 2011
Date of revision:
Handle: RePEc:bno:worpap:2011_02

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Related research

Keywords: Keywords: depreciation shocks; investment-specific technology shocks; consumption; nominal rigidities; co-movement.;

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References

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  1. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2008. "Investment shocks and business cycles," Working Paper Series WP-08-12, Federal Reserve Bank of Chicago.
  2. Stefano Eusepi & Bruce Preston, 2009. "Labor Supply Heterogeneity and Macroeconomic Co-movement," NBER Working Papers 15561, National Bureau of Economic Research, Inc.
  3. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  4. Steve Ambler & Alain Paquet, 1992. "Stochastic Depreciation and the Business Cycle Puzzle," Cahiers de recherche CREFE / CREFE Working Papers 8, CREFE, Université du Québec à Montréal.
  5. Michael Dueker & Andreas Fischer & Robert D. Dittmar, 2002. "Stochastic Capital Depreciation and the Comovement of Hours and Productivity," Working Papers 02.01, Swiss National Bank, Study Center Gerzensee.
  6. Francesco Furlanetto & Martin Seneca, 2010. "Investment-specific technology shocks and consumption," Working Paper 2010/30, Norges Bank.
  7. Francesco Furlanetto & Gisle J. Natvik & Martin Seneca, 2011. "Investment shocks and macroeconomic co-movement," Working Paper 2011/14, Norges Bank.
  8. Robert J. Barro, 2007. "Rare Disasters, Asset Prices, and Welfare Costs," NBER Working Papers 13690, National Bureau of Economic Research, Inc.
  9. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
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  15. Nir Jaimovich & Sergio Rebelo, 2006. "Can News About the Future Drive the Business Cycle?," NBER Working Papers 12537, National Bureau of Economic Research, Inc.
  16. Giorgio E. Primiceri & Andrea Tambalotti & Alejandro Justiniano, 2009. "Investment Shocks and the Relative Price of Investment," 2009 Meeting Papers 686, Society for Economic Dynamics.
  17. Kevin J. Lansing, 2011. "Asset pricing with concentrated ownership of capital," Working Paper Series 2011-07, Federal Reserve Bank of San Francisco.
  18. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
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  20. Ambler, Steve & Paquet, Alain, 1994. "Stochastic Depreciation and the Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 101-16, February.
  21. Nobuhiro Kiyotaki & Gauti Eggertsson & Andrea Ferrero & Marco Del Negro, 2010. "The Great Escape? A Quantitative Evaluation of the Fed’s Non-Standard Policies," 2010 Meeting Papers 113, Society for Economic Dynamics.
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Cited by:
  1. Tom Holden, 2012. "Medium-frequency cycles and the remarkable near trend-stationarity of output," School of Economics Discussion Papers 1412, School of Economics, University of Surrey.
  2. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
  3. Marianna Riggi, 2012. "Capital destruction, jobless recoveries, and the discipline device role of unemployment," Temi di discussione (Economic working papers) 871, Bank of Italy, Economic Research and International Relations Area.

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