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Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism

Author

Listed:
  • Reiter Michael

    (Institute for Advanced Studies, Vienna, Austria)

  • Sveen Tommy

    (BI Norwegian Business School, Oslo, Norway)

  • Weinke Lutz

    (Humboldt-Universität zu Berlin, School of Business and Economics, Institute of Economic Policy, Berlin, Germany)

Abstract

Standard (S, s) models of lumpy investment allow us to match many aspects of the micro data, but it is well known that the implied interest rate sensitivity of investment is unrealistically large. In fact, the micro-level lumpiness in investment puts empirical discipline on the modeling of investment decisions, and this makes it hard to explain the monetary policy transmission mechanism.

Suggested Citation

  • Reiter Michael & Sveen Tommy & Weinke Lutz, 2023. "Idiosyncratic Shocks, Lumpy Investment and the Monetary Transmission Mechanism," The B.E. Journal of Macroeconomics, De Gruyter, vol. 23(2), pages 1037-1055, June.
    • Handle: RePEc:bpj:bejmac:v:23:y:2023:i:2:p:1037-1055:n:6
    DOI: 10.1515/bejm-2022-0129
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    More about this item

    Keywords

    lumpy investment; monetary policy; sticky prices;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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