Investment Shocks and the Relative Price of Investment

Andrea Tambalotti, Giorgio Primiceri and Alejandro Justiniano

No 7598, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We estimate a New-Neoclassical Synthesis business cycle model with two investment shocks. The first, an investment-specific technology shock, affects the transformation of consumption into investment goods and is identified with the relative price of investment. The second shock affects the production of installed capital from investment goods or, more broadly, the transformation of savings into the future capital input. We find that this shock is the most important driver of U.S. business cycle fluctuations in the post-war period and that it is likely to proxy for more fundamental disturbances to the functioning of the financial sector. To corroborate this interpretation, we show that it correlates strongly with interest rate spreads and that it played a particularly important role in the recession of 2008.

Keywords: Business cycles; Dsge model; Financial factors; Investment-specific technology (search for similar items in EconPapers)
JEL-codes: C11 E22 E30 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Downloads: (external link)
https://cepr.org/publications/DP7598 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Investment Shocks and the Relative Price of Investment (2011)
Software Item: Code and data files for "Investment Shocks and the Relative Price of Investment" (2010)
Working Paper: Investment shocks and the relative price of investment (2009)
Working Paper: Investment Shocks and the Relative Price of Investment (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:7598

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7598

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().