Working paper

Investment Price Rigidities and Business Cycles

Alban Moura

Abstract

I incorporate investment price rigidity in a two-sector monetary model of business cycles. Fit to quarterly U.S. time series, the model suggests that price sluggishness in the investment sector is the single most empirically relevant friction to match the data. Sticky investment prices constitute an important propagation mechanism to understand the sources of aggregate fluctuations, the dynamic effects of technology shocks, and the properties of the relative price of investment goods.

Keywords

multisector DSGE model; investment price stickiness; relative price of investment;

JEL codes

  • E3: Prices, Business Fluctuations, and Cycles
  • E5: Monetary Policy, Central Banking, and the Supply of Money and Credit

See also

Published in

TSE Working Paper, n. 15-612, November 2015