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

  • Fransesco Furlanetto
  • Martin Seneca

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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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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  20. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
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  24. Nobuhiro Kiyotaki & Gauti Eggertsson & Andrea Ferrero & Marco Del Negro, 2010. "The Great Escape? A Quantitative Evaluation of the Fed’s Non-Standard Policies," 2010 Meeting Papers 113, Society for Economic Dynamics.
  25. Zheng Liu & Daniel F. Waggoner & Tao Zha, 2010. "Sources of Macroeconomic Fluctuations: A Regime-switching DSGE Approach," Emory Economics 1002, Department of Economics, Emory University (Atlanta).
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  27. Fransesco Furlanetto & Martin Seneca, 2010. "Investment-specific technology shocks and consumption," Economics wp49, Department of Economics, Central bank of Iceland.
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