Inflation and output dynamics with firm-owned capital

Lutz Weinke and Tommy Sveen ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We model firm-owned capital in a stochastic dynamic New-Keynesian general equilibrium model à la Calvo. We find that this structure implies equilibrium dynamics which are quantitatively di¤erent from the ones associated with a benchmark case where households accumulate capital and rent it to firms. Our findings therefore stress the importance of modeling an investment decision at the firm level–in addition to a meaningful price setting decision. Along the way we argue that the problem of modeling firm-owned capital with Calvo price-setting has not been solved in a correct way in the previous literature.

Keywords: Monetary policy shocks; sticky prices; investments (search for similar items in EconPapers)
JEL-codes: E22 E31 (search for similar items in EconPapers)
Date: 2003-07
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:702

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