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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.

Suggested Citation

  • Francesco Furlanetto & Martin Seneca, 2011. "New perspectives on depreciation shocks as a source of business cycle fluctuations," Working Paper 2011/02, Norges Bank.
  • Handle: RePEc:bno:worpap:2011_02
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    File URL: http://www.norges-bank.no/en/Published/Papers/working-papers/2011/wp-201102/
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. 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.
    2. Francesco Furlanetto & Martin Seneca, 2010. "Investment-specific technology shocks and consumption," Working Paper 2010/30, Norges Bank.
    3. Juan Carlos Parra-Alvarez, 2013. "A comparison of numerical methods for the solution of continuous-time DSGE models," CREATES Research Papers 2013-39, Department of Economics and Business Economics, Aarhus University.
    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. Donadelli, Michael & Grüning, Patrick & Jüppner, Marcus & Kizys, Renatas, 2017. "Global temperature, R&D expenditure, and growth," SAFE Working Paper Series 188, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    6. 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.
    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.
    8. Francois Gourio, 2012. "Disaster Risk and Business Cycles," American Economic Review, American Economic Association, vol. 102(6), pages 2734-2766, October.
    9. Stéphane Auray & Aurélien Eyquem, 2016. "Episodes of War and Peace in an Estimated Open Economy Model," Working Papers 2016-01, Center for Research in Economics and Statistics.
    10. Curatola, Giuliano & Donadelli, Michael & Grüning, Patrick & Meinerding, Christoph, 2016. "Investment-specific shocks, business cycles, and asset prices," SAFE Working Paper Series 129, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    11. Francesco Furlanetto & Nicolas Groshenny, 2012. "Matching efficiency and business cycle fluctuations," Working Paper 2012/07, Norges Bank.
    12. Kevin J. Lansing, 2011. "Asset pricing with concentrated ownership of capital," Working Paper 2011/18, Norges Bank.

    More about this item

    Keywords

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

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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