Lumpy investment and the monetary transmission mechanism

Michael Reiter; Tommy Sveen; Lutz Weinke

doi:10.1016/j.jmoneco.2013.08.003

Lumpy investment and the monetary transmission mechanism

Michael Reiter, Tommy Sveen, Lutz Weinke

Economics

Research output: Contribution to journal › Article › peer-review

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)
Pages (from-to)	821-834
Number of pages	14
Journal	Journal of Monetary Economics
Volume	60
Issue number	7
DOIs	https://doi.org/10.1016/j.jmoneco.2013.08.003
State	Published - Oct 2013

Keywords

Lumpy investment
Sticky prices

ASJC Scopus subject areas

Finance
Economics and Econometrics

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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.",

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