Firm-Specific Capital, Nominal Rigidities and the Business Cycle

Martin Eichenbaum, Lawrence Christiano, Jesper Lindé and David Altig

No 4858, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Macroeconomic and microeconomic data paint conflicting pictures of price behaviour. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model that resolves this apparent micro/macro conflict. Our model is consistent with post-war US 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 pre-determined within a period.

JEL-codes: E30 E40 E50 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Citations: View citations in EconPapers (199)

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Related works:
Journal Article: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2011)
Working Paper: Firm-specific capital, nominal rigidities and the business cycle (2010)
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 (2004)
Working Paper: Firm-Specific Capital, Nominal Rigidities and the Business Cycle (2004)
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