Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97710
Authors: 
Verona, Fabio
Year of Publication: 
2012
Series/Report no.: 
IMFS Working Paper Series 55
Abstract: 
In this paper, I introduce lumpy micro-level capital adjustment into a sticky information general equilibrium model. Lumpy adjustment arises because of inattentiveness in capital investment decisions instead of the more common assumption of non-convex adjustment costs. The model features inattentiveness as the only source of stickiness. I find that the model with lumpy investment yields business cycle dynamics which differ substantially from those of an otherwise identical model with frictionless investment and are much more consistent with the empirical evidence. These results therefore strengthen the case in favour of the relevance of microeconomic investment lumpiness for the business cycle.
Subjects: 
sticky information
general equilibrium
lumpy investment
business cy- cle
JEL: 
D83
E10
E22
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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