Firm-specific capital, nominal rigidities, and the business cycle

David E. Altig, Lawrence J. Christiano, Martin Eichenbaum () and Jesper Lindé

No 416, Working Paper from Federal Reserve Bank of Cleveland

Abstract: Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and predetermined within a period.

Keywords: Inflation (Finance); Monetary policy; Business cycles (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2004
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Related works:
Working Paper: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2004)
Working Paper: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2005)
Working Paper: Firm-specific capital, nominal rigidities and the business cycle (2004)
Working Paper: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2005)
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