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New Perspectives on Depreciation Shocks as a Source of Business Cycle Fluctuations

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  • Fransesco Furlanetto
  • Martin Seneca

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 a 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 Department of Economics, Central bank of Iceland in its series Economics with number wp48.

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Date of creation: Jul 2010
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Handle: RePEc:ice:wpaper:wp48

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  1. Francesco Furlanetto & Martin Seneca, 2010. "Investment-specific technology shocks and consumption," Working Paper 2010/30, Norges Bank.
  2. Francesco Furlanetto & Gisle J. Natvik & Martin Seneca, 2011. "Investment shocks and macroeconomic co-movement," Working Paper 2011/14, Norges Bank.
  3. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2009. "Investment shocks and the relative price of investment," Staff Reports 411, Federal Reserve Bank of New York.
  4. Robert G. King & Sergio T. Rebelo, 2000. "Resuscitating Real Business Cycles," NBER Working Papers 7534, National Bureau of Economic Research, Inc.
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  8. Michael J. Dueker & Andreas M. Fischer & Robert D. Dittmar, 2004. "Stochastic capital depreciation and the comovement of hours and productivity," Working Papers 2002-003, Federal Reserve Bank of St. Louis.
  9. Stefano Eusepi & Bruce Preston, 2009. "Labor supply heterogeneity and macroeconomic comovement," Staff Reports 399, Federal Reserve Bank of New York.
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  11. 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.
  12. Kevin J. Lansing, 2011. "Asset pricing with concentrated ownership of capital," Working Paper Series 2011-07, Federal Reserve Bank of San Francisco.
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  19. Khan, Hashmat & Tsoukalas, John, 2011. "Investment shocks and the comovement problem," Journal of Economic Dynamics and Control, Elsevier, vol. 35(1), pages 115-130, January.
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  21. 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.
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  26. repec:car:carecp:09-09 is not listed on IDEAS
  27. anonymous, 2008. "Monetary policy report to the Congress," Web Site 16, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

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