Inflation And Output Dynamics With Firm-Owned Capital
- Topics:
- Organization
- Tags:
- Business Operations,
- Currency & Foreign Exchange,
- Dynamics,
- Finance,
- Inflation,
- Modeling,
- Norges Bank,
- Research & Development
- Source:
- Norges Bank
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Overview: This paper models firm-owned capital in a stochastic dynamic New-Keynesian general equilibrium model a la Calvo. It is found 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. 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 paper argues that the problem of modeling firm-owned capital with Calvo price-setting has not been solved in a correct way in the previous literature.
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Format: PDF | Size: 234KB | Date: Jul 2003 | Pages: 25
