Firm-specific capital, nominal rigidities and the business cycle

By David E. Altig, Larry Christiano, Martin Eichenbaum, J. Lindé. 2011

603 citations recorded by the source corpus.

Macroeconomic and microeconomic data paint conflicting pictures of price behavior. Macroeconomic data suggest that inflation is inertial. Microeconomic data indicate that firms change prices frequently. We formulate and estimate a model which resolves this apparent micro - macro conflict. Our model is consistent with post-war U.S. evidence on inflation inertia even though firms re-optimize prices on average once every 1.5 quarters. The key feature of our model is that capital is firm-specific and predetermined within a period.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/19e54f449ecd2d5efac50c177b1c9e08dbdd4282

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In Economics and Econometrics

Citations in the corpus

New Keynesian versus Old Keynesian Government Spending Multipliers (2010, methodology): “They make use of an estimated new-Keynesian DSGE model due to Altig et al. (2004). In our simulations using the Smets–Wouters model in Sections 3–5 we have already taken into account this argument by assuming a constant funds rate for up to 2 years and then a return to a stabilizing rule.”
Business Cycle Dynamics Under Rational Inattention (2015, neutral): “Substituting the labor demand function (25), the flow budget constraint (3) and the consumption aggregator (2) into the period utility function (1) yields an expression for period utility that incorporates those three constraints.”
Financial Factors in Economic Fluctuations (2010, neutral): “[4] Altig, David, Lawrence J.”
Dynamics of Fiscal Financing in the United States (2009, neutral): “6 Although many recent DSGE models allow for 1 or 2 common stochastic trends (examples include Greenwood et al., 1997, 2000; Altig et al., 2005), incorporating such features into a model with fiscal policy is nontrivial.”
Price Rigidity: Microeconomic Evidence and Macroeconomic Implications (2013, positive): “Prominent examples include demand structures in which the elasticity of demand is an increasing function of a firm’s relative price (Kimball, 1995) and heterogeneous factor markets (Woodford, 2003, 2005; Altig et al., 2011).”
On DSGE Models (2018, positive): “12Examples of the impulse response matching approach include CEE, Altig et al. (2011), Iacoviello (2005) and Rotemberg and Woodford (1991).”
Long-Run Stockholder Consumption Risk and Asset Returns (2009, background): “Evidence from the macroeconomic growth and real business cycle literature highlights that consumption and production respond slowly to technology shocks, peaking at 3- to 4-year horizons (see Altig et al. (2005)), which is, perhaps not coincidentally, about the same horizon over which consumption re”
The Kinked Demand Curve and Price Rigidity: Evidence from Scanner Data (2010, neutral): “1 For example, Galı́ and Gertler (1999), Sbordone (2002), Woodford (2003), Altig et al. (2005), and Burstein and Hellwig (2007).”
Habit Formation in Consumption: A Meta-Analysis (2017, neutral): “(2011) Bjornland et al. (2011) Altig et al.”