Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/153450 
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper No. 1016
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We analyze the dynamic e¤ects of lumpy factor adjustments at the firm level onto the aggregate economy. We find that distinguishing between capital and labour as lumpy factors within the production function result in very dfferent dynamics for aggregate output, investment and labour in an otherwise standard real business cycle model. Lumpy capital leaves the RBC mainly unchanged, while lumpy labour allows for persistence and an inner propagation within the model in form of hump-shaped impulse repsonses. In addition, when modeling lumpy adjustments on both investment and labour, the aggregate effects are even stronger. We investigate the mechanisms underlying these results and identify the elasticity of factor supply as the most important element in accounting for these differences.
Subjects: 
business cycles
Elasticity of
Lumpy investment
Lumpy labor adjustment
JEL: 
E32
E22
E24
Document Type: 
Working Paper

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