Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209975
Authors: 
Furlanetto, Francesco
Seneca, Martin
Year of Publication: 
2010
Series/Report no.: 
Working Paper 2010/30
Abstract: 
Current business cycle models systematically underestimate the correlation between consumption and investment. One reason for this failure is that a positive investment-specific technology shock generally induces a negative consumption response. The objective of this paper is to investigate whether positive consumption responses to investment-specific technology shocks can be obtained in a modern business cycle model. We find that the answer to this question is yes. With a combination of nominal rigidities and non-separable preferences, the consumption response is positive for general parameterisations of the model.
Subjects: 
GHH preferences
investment-specific technology shocks
consumption
nominal rigidities
comovement
JEL: 
E32
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-587-8
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/4.0/deed.no
Document Type: 
Working Paper
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