Persistent and transitory shocks, learning, and investment dynamics
AbstractThis paper introduces a new approach to understanding investment. The distinctive feature of our approach is that shocks to the economic fundamentals have both persistent and transitory components, and that firms must disentangle the persistent from the transitory shocks. The model generates interesting dynamics. Simulations of the model show that the response of investment to changes in the interest rate can vary widely over time, that the current response of investment depends on the sequence of past shocks, that investment will respond less when the firm is confident about its beliefs and more when a change in economic fundamentals challenges the firm?s beliefs, and that investment booms and crashes may occur without any change in the true state of the economy. Simulations of the model also show that it captures many ?stylized facts? of investment dynamics documented in previous empirical studies. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 77.
Date of creation: 1999
Date of revision:
Contact details of provider:
Postal: Neuer Jungfernstieg 21, D-20347 Hamburg
Web page: http://www.econstor.eu/handle/10419/20
More information through EDIRC
Other versions of this item:
- Moore, Bartholomew & Schaller, Huntley, 2002. "Persistent and Transitory Shocks, Learning, and Investment Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(3), pages 650-77, August.
- Bartholomew Moore & Huntley Schaller, 2001. "Persistent and Transitory Shocks, Learning, and Investment Dynamics," Carleton Economic Papers 01-02, Carleton University, Department of Economics, revised Aug 2002.
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Buranavityawut, Nonthipoth & Freeman, Mark C. & Freeman, Nisih, 2006. "Has the equity premium been low for 40 years?," The North American Journal of Economics and Finance, Elsevier, vol. 17(2), pages 191-205, August.
- Emine Boz, 2006. "Can Miracles Lead to Crises? An Informational Frictions Explanation of Emerging Markets Crises," Computing in Economics and Finance 2006 19, Society for Computational Economics.
- Wilman Gómez & Carlos Esteban Posada, . "Un "Choque" del Activo Externo Neto y el Ciclo Económico Colombiano," Borradores de Economia 285, Banco de la Republica de Colombia.
- Emine Boz, 2009.
"Can Miracles Lead to Crises? The Role of Optimism in Emerging Markets Crises,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 41(6), pages 1189-1215, 09.
- Emine Boz, 2007. "Can Miracles Lead to Crises? The Role of Optimism in Emerging Markets Crises," IMF Working Papers 07/223, International Monetary Fund.
- Byrne, Joseph P. & Davis, E. Philip, 2004. "Permanent and temporary inflation uncertainty and investment in the United States," Economics Letters, Elsevier, vol. 85(2), pages 271-277, November.
- Waters, George A., 2007. "Regime changes, learning and monetary policy," Journal of Macroeconomics, Elsevier, vol. 29(2), pages 255-282, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.