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Publication Detailed Description
Firm-specific capital, inflation persistence and the sources of business cycles
Journal Title
European Economic Review
Year (definitive publication)
2015
Language
English
Country
United States of America
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Abstract
This paper estimates a firm-specific capital DSGE model. Firm-specific capital improves the fit of DSGE models to the data (as shown by a large increase in the value of the log marginal likelihood). This results from a lower implied estimate of the NKPC slope for a given degree of price stickiness. Firm-specific capital leads to a better fit to the volatilities of macro variables and a greater persistence of inflation. It is also shown that firm-specific capital reduces the dependence of New Keynesian models on price markup shocks and that it increases the persistence of output to monetary shocks.
Acknowledgements
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Keywords
New Keynesian models,Sticky prices,DSGE,Business cycles,Firm-specific capital,Bayesian estimation
Fields of Science and Technology Classification
- Economics and Business - Social Sciences
Contributions to the Sustainable Development Goals of the United Nations
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