Lumpy investment in sticky information general equilibrium

Fabio Verona

No 16/2013, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: In this paper, I introduce lumpy micro-level capital adjustment into a sticky information general equilibrium model. Lumpy adjustment arises because of inattentiveness in capital investment decisions instead of the more common assumption of non-convex adjustment costs. The model features inattentiveness as the only source of stickiness. I find that the model with lumpy investment yields business cycle dynamics which differ substantially from those of an otherwise identical model with frictionless investment and are much more consistent with the empirical evidence. These results therefore strengthen the case in favour of the relevance of microeconomic investment lumpiness for the business cycle.

Keywords: sticky information; general equilibrium; lumpy investment; business cycle (search for similar items in EconPapers)
JEL-codes: D83 E10 E22 E32 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/212256/1/bof-rdp2013-016.pdf (application/pdf)

Related works:
Working Paper: Lumpy investment in sticky information general equilibrium (2012)
Working Paper: Lumpy investment in sticky information general equilibrium (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2013_016

Access Statistics for this paper

More papers in Bank of Finland Research Discussion Papers from Bank of Finland Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().