Labour markets and firm-specific capital in new Keynesian general equilibrium models

Charles Nolan; Christoph Thoenissen

doi:10.1016/j.jmacro.2007.02.002

Labour markets and firm-specific capital in new Keynesian general equilibrium models

Charles Nolan, Christoph Thoenissen

Research output: Contribution to journal › Article › peer-review

Abstract

This paper examines the consequences of introducing firm-specific capital into a selection of commonly used sticky price business cycle models. We find that modelling firm-specific capital markets greatly reduces the response of inflation to changes in average real marginal cost. Calibrated to US data, we find that models with firm-specific capital generate a less volatile, as well as more persistent series for inflation than those which assume an economy wide market for capital. Overall, it is not clear if assuming firm-specific capital helps our models match the US business cycle data. (c) 2007 Elsevier Inc. All rights reserved.

Original language	English
Pages (from-to)	817-843
Number of pages	27
Journal	Journal of Macroeconomics
Volume	30
Issue number	3
DOIs	https://doi.org/10.1016/j.jmacro.2007.02.002
Publication status	Published - Sept 2008

Keywords

intertemporal macro
monetary policy
real and nominal labour market distortions
firm-specific capital
BUSINESS-CYCLE
PRICES

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10.1016/j.jmacro.2007.02.002

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abstract = "This paper examines the consequences of introducing firm-specific capital into a selection of commonly used sticky price business cycle models. We find that modelling firm-specific capital markets greatly reduces the response of inflation to changes in average real marginal cost. Calibrated to US data, we find that models with firm-specific capital generate a less volatile, as well as more persistent series for inflation than those which assume an economy wide market for capital. Overall, it is not clear if assuming firm-specific capital helps our models match the US business cycle data. (c) 2007 Elsevier Inc. All rights reserved.",

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AB - This paper examines the consequences of introducing firm-specific capital into a selection of commonly used sticky price business cycle models. We find that modelling firm-specific capital markets greatly reduces the response of inflation to changes in average real marginal cost. Calibrated to US data, we find that models with firm-specific capital generate a less volatile, as well as more persistent series for inflation than those which assume an economy wide market for capital. Overall, it is not clear if assuming firm-specific capital helps our models match the US business cycle data. (c) 2007 Elsevier Inc. All rights reserved.

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Labour markets and firm-specific capital in new Keynesian general equilibrium models

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