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Lumpy investment and the monetary transmission mechanism

  • Reiter, Michael
  • Sveen, Tommy
  • Weinke, Lutz

The lumpy nature of plant-level investment is generally not taken into account in the context of New Keynesian monetary theory (see, e.g., Christiano et al., 2005; Woodford, 2005). Our main result shows that if this theory is augmented by a standard model of lumpy investment, monetary policy shocks lead to large but very short-lived impacts on output and inflation, in a way that goes against empirical evidence and the consensus view in the literature.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 60 (2013)
Issue (Month): 7 ()
Pages: 821-834

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Handle: RePEc:eee:moneco:v:60:y:2013:i:7:p:821-834
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  19. Michael K. Johnston, 2009. "Real and Nominal Frictions within the Firm: How Lumpy Investment Matters for Price Adjustment," Working Papers 09-36, Bank of Canada.
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