Investment Shocks and Macroeconomic Co-Movement
Copyright policy )Investment Shocks and Macroeconomic Co-Movement
Recent studies fi nd that shocks to the marginal efficiency of investment are a main driver of business cycles. Yet, they struggle to explain why consumption co-moves with real variables such as investment and output, which is a typical feature of an empirically recognizable business cycle. In this paper we show that within a conventional business cycle model, rule-of-thumb consumption provides a straightforward explanation of macroeconomic co-movement after a shock to the marginal efficiency of investment.
- BI Norwegian Business School Norway
- Norges Bank Norway
- Bank of England United Kingdom
JEL: E32, VDP::Samfunnsvitenskap: 200::Økonomi: 210::Samfunnsøkonomi: 212, ddc:330, investment shocks, consumption, rule-of-thumb consumers, nominal rigidities, E32, co-movement
JEL: E32, VDP::Samfunnsvitenskap: 200::Økonomi: 210::Samfunnsøkonomi: 212, ddc:330, investment shocks, consumption, rule-of-thumb consumers, nominal rigidities, E32, co-movement
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