Lumpy Investment and State-Dependent Pricing in General Equilibrium

Reiter, Michael, Sveen, Tommy and Weinke, Lutz (May 2009) Lumpy Investment and State-Dependent Pricing in General Equilibrium. IHS Economics Series 239


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Abstract or Table of Contents

Abstract: The lumpy nature of plant-level investment is generally not taken into account in the context of monetary theory (see, e.g., Christiano et al. 2005 and Woodford 2005). We formulate a generalized (S,s) pricing and investment model which is empirically more plausible along that dimension. Surprisingly, our main result shows that the presence of lumpy investment casts doubt on the ability of sticky prices to imply a quantitatively relevant monetary transmission mechanism.;

Item Type: IHS Series
Keywords: 'Lumpy investment' 'Sticky prices'
Classification Codes (e.g. JEL): E22, E31, E32
Status: Published
Date Deposited: 26 Sep 2014 10:38
Last Modified: 01 Aug 2018 05:30

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