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NEW PERSPECTIVES ON DEPRECIATION SHOCKS AS A SOURCE OF BUSINESS CYCLE FLUCTUATIONS

Published online by Cambridge University Press:  11 June 2013

Francesco Furlanetto*
Affiliation:
Norges Bank
Martin Seneca
Affiliation:
Norges Bank
*
Address correspondence to: Francesco Furlanetto, Norges Bank, PO Box 1179, Sentrum, 0107 Oslo, Norway; e-mail: francesco.furlanetto@norges-bank.no.

Abstract

In this paper we study the transmission of capital depreciation shocks. The existing literature in the real business cycle tradition has concluded that these shocks are irrelevant to business cycle fluctuations. We show that they are potentially important drivers of aggregate fluctuations in a new Keynesian model. Nominal rigidities and some persistence in the shock process are the key ingredients that generate co-movement across real variables.

Type
Articles
Copyright
Copyright © Cambridge University Press 2013 

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NEW PERSPECTIVES ON DEPRECIATION SHOCKS AS A SOURCE OF BUSINESS CYCLE FLUCTUATIONS
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