New Perspectives on Capital and Sticky Prices

Tommy Sveen () and Lutz Weinke

No 2004/03, Working Paper from Norges Bank

Abstract: We model capital accumulation in a dynamic New-Keynesian model with staggered price setting à la Calvo. It is assumed that firms do not have access to a rental market for capital. We compare our model with an alternative specification where households accumulate capital and rent it to firms. The di?erence in implied equilibrium dynamics is large, as we justify by proposing a simple metric. This result invites us to interpret some of the puzzling empirical findings that have been obtained using models with staggered price setting and a rental market for capital as an artefact of this particular set of assumptions. JEL Classification: E22, E31

Keywords: Sticky Prices; Investments; Rental Market JEL (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-03-17
New Economics Papers: this item is included in nep-dev and nep-mac
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Citations: View citations in EconPapers (23)

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