Inflation and Output Dynamics with Firm-Owned Capital

UPF Economics and Business Working Paper No. 702

25 Pages Posted: 12 Aug 2004

See all articles by Lutz Weinke

Lutz Weinke

Independent

Tommy Sveen

Norges Bank - Research Department

Date Written: July 2004

Abstract

We model firm-owned capital in a stochastic dynamic New-Keynesian general equilibrium model a la Calvo. We find that this structure implies equilibrium dynamics which are quantitatively different from the ones associated with a benchmark case where households accumulate capital and rent it to firms. Our findings therefore stress the importance of modeling an investment decision at the firm level - in addition to a meaningful price setting decision. Along the way we argue that the problem of modeling firm-owned capital with Calvo price-setting has not been solved in a correct way in the previous literature.

Keywords: Monetary policy shocks, sticky prices, investments

JEL Classification: E22, E31

Suggested Citation

Weinke, Lutz and Sveen, Tommy, Inflation and Output Dynamics with Firm-Owned Capital (July 2004). UPF Economics and Business Working Paper No. 702. Available at SSRN: https://ssrn.com/abstract=562949 or http://dx.doi.org/10.2139/ssrn.562949

Lutz Weinke (Contact Author)

Independent

No Address Available

Tommy Sveen

Norges Bank - Research Department ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Register to save articles to
your library

Register

Paper statistics

Downloads
89
Abstract Views
637
rank
290,671
PlumX Metrics