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Investment shocks and macroeconomic co-movement

Francesco Furlanetto (), Gisle Natvik and Martin Seneca

Journal of Macroeconomics, 2013, vol. 37, issue C, 208-216

Abstract: Recent studies find that shocks to the marginal efficiency of investment are main drivers of business cycles. However, they struggle to explain why consumption co-moves with key real variables such as investment and output. In this paper, we show that, within a conventional business cycle model, rule-of-thumb consumption provides a straightforward explanation of macroeconomic co-movement after a shock to the marginal efficiency of investment.

Keywords: Investment shocks; Consumption; Rule-of-thumb consumers; Nominal rigidities; Co-movement (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2013
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Working Paper: Investment shocks and macroeconomic co-movement (2011) Downloads
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