Abstract
The lumpy nature of plant-level investment is generally not taken into account in the context of New Keynesian monetary theory (see, e.g., Christiano et al., 2005; Woodford, 2005). Our main result shows that if this theory is augmented by a standard model of lumpy investment, monetary policy shocks lead to large but very short-lived impacts on output and inflation, in a way that goes against empirical evidence and the consensus view in the literature.
Original language | English (US) |
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Pages (from-to) | 821-834 |
Number of pages | 14 |
Journal | Journal of Monetary Economics |
Volume | 60 |
Issue number | 7 |
DOIs | |
State | Published - Oct 2013 |
Keywords
- Lumpy investment
- Sticky prices
ASJC Scopus subject areas
- Finance
- Economics and Econometrics