Stock Market and Investment Goods Prices: Implications for Macroeconomics / Lawrence J. Christiano, Jonas D. M. Fisher.

By:

Christiano, Lawrence J

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w10031.Publication details: Cambridge, Mass. National Bureau of Economic Research 2003.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Stock market prices, a measure of the marginal cost of installed capital, are procyclical. Yet, prices of investment goods, the main input into new installed capital, are countercyclical. We exploit this information to identify the driving forces of the business cycle and the nature of capital installation costs. In our model installation costs are increasing in the growth of investment, and the business cycle is driven by permanent investment-specific technology shocks and transitory neutral technology shocks. When calibrated to the capital price observations, the model does well at accounting for the main features of asset returns and the business cycle of macroeconomic aggregates. In addition, unlike most other models, our's accounts for sectoral comovement in both output and factor inputs.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w10031 (Browse shelf(Opens below))	Not For Loan

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October 2003.

Stock market prices, a measure of the marginal cost of installed capital, are procyclical. Yet, prices of investment goods, the main input into new installed capital, are countercyclical. We exploit this information to identify the driving forces of the business cycle and the nature of capital installation costs. In our model installation costs are increasing in the growth of investment, and the business cycle is driven by permanent investment-specific technology shocks and transitory neutral technology shocks. When calibrated to the capital price observations, the model does well at accounting for the main features of asset returns and the business cycle of macroeconomic aggregates. In addition, unlike most other models, our's accounts for sectoral comovement in both output and factor inputs.