by Tommy Sveena and Lutz Weinkeb
New Keynesian theory generally abstracts from the lumpy nature of plant-level investment. Given the prominent role of investment spending for shaping optimal monetary policy, this simplification could be problematic. Our analysis suggests, however, that this is not the case in the context of a New Keynesian model featuring lumpy investment à la Sveen and Weinke (2007).
JEL Codes: E22, E31, E32.
Full article (PDF, 28 pages, 352 kb)
a BI Norwegian Business School
b Humboldt-Universität zu Berlin