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

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References

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  1. 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.
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  4. Smets, Frank & Wouters, Raf, 2007. "Shocks and frictions in US business cycles: a Bayesian DSGE approach," Working Paper Series 0722, European Central Bank.
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Citations

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Cited by:
  1. François Gourio, 2009. "Disasters Risk and Business Cycles," NBER Working Papers 15399, National Bureau of Economic Research, Inc.
  2. Juan Carlos Parra-Alvarez, 2013. "A comparison of numerical methods for the solution of continuous-time DSGE models," CREATES Research Papers 2013-39, School of Economics and Management, University of Aarhus.
  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.
  4. 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.
  5. Albonico, Alice & Kalyvitis, Sarantis & Pappa, Evi, 2014. "Capital maintenance and depreciation over the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 39(C), pages 273-286.
  6. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
  7. Jasmina Hasanhodzic & Laurence J. Kotlikoff, 2013. "Generational Risk – Is It a Big Deal?: Simulating an 80-Period OLG Model with Aggregate Shocks," NBER Working Papers 19179, National Bureau of Economic Research, Inc.

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