Abstract

http://ssrn.com/abstract=666822
 
 

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Firm-Specific Capital, Nominal Rigidities and the Business Cycle


David Altig


Federal Reserve Banks - Federal Reserve Bank of Atlanta; Federal Reserve Bank of Cleveland; University of Chicago - Booth School of Business

Jesper Lindé


Sveriges Riksbank - Research Division

Lawrence J. Christiano


Northwestern University; Federal Reserve Bank of Cleveland; Federal Reserve Bank of Chicago; Federal Reserve Bank of Minneapolis; National Bureau of Economic Research (NBER)

Martin Eichenbaum


Northwestern University; National Bureau of Economic Research (NBER)

October 18, 2006

FRB of Chicago Working Paper No. 2005-01
Riksbank Research Paper Series No. 15
Sveriges Riksbank Working Paper Series No. 176
FRB of Cleveland Working Paper No. 04-16

Abstract:     
Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and predetermined within a period.

Number of Pages in PDF File: 54

Keywords: capital, inflation, price behavior

JEL Classification: E3, E4, E5

working papers series





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Date posted: February 14, 2005 ; Last revised: March 9, 2009

Suggested Citation

Altig, David and Lindé, Jesper and Christiano, Lawrence J. and Eichenbaum, Martin, Firm-Specific Capital, Nominal Rigidities and the Business Cycle (October 18, 2006). FRB of Chicago Working Paper No. 2005-01; Riksbank Research Paper Series No. 15; Sveriges Riksbank Working Paper Series No. 176 ; FRB of Cleveland Working Paper No. 04-16. Available at SSRN: http://ssrn.com/abstract=666822 or http://dx.doi.org/10.2139/ssrn.666822

Contact Information

David Altig
Federal Reserve Banks - Federal Reserve Bank of Atlanta
1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
Federal Reserve Bank of Cleveland ( email )
East 6th & Superior
Cleveland, OH 44101-1387
United States
216-579-2041 (Phone)
University of Chicago - Booth School of Business
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Jesper Lindé
Sveriges Riksbank - Research Division ( email )
S-103 37 Stockholm
Sweden
+46 8 787 0873 (Phone)
HOME PAGE: http://www.riksbank.com
Lawrence J. Christiano (Contact Author)
Northwestern University ( email )
2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8231 (Phone)
847-491-7001 (Fax)
Federal Reserve Bank of Cleveland
East 6th & Superior
Cleveland, OH 44101-1387
United States
Federal Reserve Bank of Chicago
230 South LaSalle Street
Chicago, IL 60604
United States
Federal Reserve Bank of Minneapolis
90 Hennepin Avenue
Minneapolis, MN 55480
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Martin Eichenbaum
Northwestern University ( email )
2003 Sheridan Road
Evanston, IL 60208
United States
847-491-8232 (Phone)
847-491-7001 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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