Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism

Michael Reiter, Tommy Sveen and Lutz Weinke
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Tommy Sveen: BI Norwegian Business School
Lutz Weinke: Humboldt-Universitaet zu Berlin

No 16, IHS Working Paper Series from Institute for Advanced Studies

Abstract: Standard (S,s) models of lumpy investment allow us to match many aspects of the micro data, but it is well known that the implied interest rate sensitivity of investment is unrealistically large. The monetary transmission mechanism is therefore a particularly clean experiment to assess the macroeconomic relevance of any investment theory. Our results show that lumpy investment can coexist with a realistic monetary transmission mechanism, but that we are nevertheless still a step away from a micro-founded theory of monetary policy.

Keywords: Lumpy Investment; Sticky Prices (search for similar items in EconPapers)
JEL-codes: E22 E31 E32 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2020-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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https://irihs.ihs.ac.at/id/eprint/5377/ First version, 2020 (application/pdf)

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Journal Article: Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism (2023)
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