Investment Shocks and Business Cycles

Alejandro Justiniano, Giorgio Primiceri and Andrea Tambalotti

No 15570, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the driving forces of fluctuations in an estimated New Neoclassical Synthesis model of the U.S. economy with several shocks and frictions. In this model, shocks to the marginal efficiency of investment account for the bulk of fluctuations in output and hours at business cycle frequencies. Imperfect competition and, to a lesser extent, technological frictions are the key to their transmission. Labor supply shocks explain a large fraction of the variation in hours at very low frequencies, but are irrelevant over the business cycle. This is important because their microfoundations are widely regarded as unappealing.

JEL-codes: C11 E3 E32 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-bec, nep-cba and nep-mac
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Published as Justiniano, Alejandro & Primiceri, Giorgio E. & Tambalotti, Andrea, 2010. "Investment shocks and business cycles," Journal of Monetary Economics, Elsevier, vol. 57(2), pages 132-145, March.

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Related works:
Journal Article: Investment shocks and business cycles (2010)
Working Paper: Investment Shocks and Business Cycles (2008)
Working Paper: Investment shocks and business cycles (2008)
Working Paper: Investment shocks and business cycles (2008)
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