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Pitfalls in the Modeling of Forward-Looking Price Setting and Investment Decisions

Author(s) : Sveen, Tommy , Weinke, Lutz
Description : The present paper makes progress in explaining the role of capital for inflation and output dynamics. We followWoodford (2003, Ch. 5) in assuming Calvo pricing combined with a convex capital adjustment cost at the firm level. Our main result is that capital accumulation affects inflation dynamics pr...
Language(s) : English
Subject(s) : Sticky prices, investments
Publisher(s) :
Contributor(s) : Universitat Pompeu Fabra. Departament d'Economia i Empresa
Source(s) :
Publication Date(s) : 2012-07-11