Firm-specific capital, nominal rigidities and the business cycle

David Altig, Lawrence Christiano, Martin Eichenbaum and Jesper Lindé

No WP-05-01, Working Paper Series from Federal Reserve Bank of Chicago

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

Keywords: Business cycles; Macroeconomics; Microeconomics (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (39)

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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 (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)
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