Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism

Michael Reiter, Sveen Tommy and Weinke Lutz ()
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Sveen Tommy: BI Norwegian Business School, Oslo, Norway
Weinke Lutz: Humboldt-Universität zu Berlin, School of Business and Economics, Institute of Economic Policy, Berlin, Germany

The B.E. Journal of Macroeconomics, 2023, vol. 23, issue 2, 1037-1055

Abstract: Standard (S, s) models of lumpy investment allow us to match many aspects of the micro data, but it is well known that the implied interest rate sensitivity of investment is unrealistically large. In fact, the micro-level lumpiness in investment puts empirical discipline on the modeling of investment decisions, and this makes it hard to explain the monetary policy transmission mechanism.

Keywords: lumpy investment; monetary policy; sticky prices (search for similar items in EconPapers)
JEL-codes: E22 E31 E32 (search for similar items in EconPapers)
Date: 2023
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Working Paper: Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism (2020)
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DOI: 10.1515/bejm-2022-0129

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