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Investment price rigidity and business cycles

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  • Alban Moura

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Abstract

This paper incorporates sticky investment prices in a two-sector monetary model of business cycles. Fit to quarterly U.S. time series, the model suggests that price rigidity in the investment sector is the single most empirically relevant friction to match the data. Sticky investment prices are also important to understand the dynamic effects of technology shocks and their pass-through to the relative price of investment goods.

Suggested Citation

  • Alban Moura, 2017. "Investment price rigidity and business cycles," BCL working papers 105, Central Bank of Luxembourg.
  • Handle: RePEc:bcl:bclwop:bclwp105
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    References listed on IDEAS

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    1. Justiniano, Alejandro & Primiceri, Giorgio E. & Tambalotti, Andrea, 2010. "Investment shocks and business cycles," Journal of Monetary Economics, Elsevier, pages 132-145.
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    More about this item

    Keywords

    investment price rigidity; relative price of investment; multisector DSGE model.;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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