Lumpy investment and the monetary transmission mechanism

Michael Reiter, Tommy Sveen () and Lutz Weinke

Journal of Monetary Economics, 2013, vol. 60, issue 7, 821-834

Abstract: 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.

Keywords: Lumpy investment; Sticky prices (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:60:y:2013:i:7:p:821-834

DOI: 10.1016/j.jmoneco.2013.08.003

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