NEW PERSPECTIVES ON DEPRECIATION SHOCKS AS A SOURCE OF BUSINESS CYCLE FLUCTUATIONS

Francesco Furlanetto and Martin Seneca

Macroeconomic Dynamics, 2014, vol. 18, issue 6, 1209-1233

Abstract: In this paper we study the transmission of capital depreciation shocks. The existing literature in the real business cycle tradition has concluded that these shocks are irrelevant to business cycle fluctuations. We show that they are potentially important drivers of aggregate fluctuations in a new Keynesian model. Nominal rigidities and some persistence in the shock process are the key ingredients that generate co-movement across real variables.

Date: 2014
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Related works:
Working Paper: New perspectives on depreciation shocks as a source of business cycle fluctuations (2011)
Working Paper: New Perspectives on Depreciation Shocks as a Source of Business Cycle Fluctuations (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:18:y:2014:i:06:p:1209-1233_00

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