According to the Taylor principle a central bank should adjust the nominal interest rate by more than one for one in response to changes in current in?ation. Most of the existing literature supports the view that by following this simple recommendation a central bank can avoid being a source of...

We discuss some di?culties in a dynamic New-Keynesian model with staggered price setting à la Calvo and a convex capital adjustment cost at the firm level, as considered by Woodford (2003, Ch. 5). It is shown that the implied simultaneous price setting and investment decision has not been...

The lumpy nature of plant-level investment is generally not taken into account in the context of New Keynesian monetary theory (see, e.g., Christiano et al., 2005; Woodford, 2005). Our main result shows that if this theory is augmented by a standard model of lumpy investment, monetary policy shocks...

The lumpy nature of plant-level investment is generally not taken into account in the context of monetary theory (see, e.g., Christiano et al. 2005 and Woodford 2005). We formulate a generalized (S,s) pricing and investment model which is empirically more plausible along that dimension....

The lumpy nature of plant-level investment is generally not taken into account in the context of monetary theory (see, e.g., Christiano et al. 2005 and Woodford 2005). We formulate a generalized (S,s) pricing and investment model which is empirically more plausible along that dimension....

New-Keynesian (NK) models can only account for the dynamic effects of monetary policy shocks if it is assumed that aggregate capital accumulation is much smoother than it would be the case under frictionless firm-level investment, as discussed in Woodford (2003, Ch. 5). We find that lumpy...

In the presence of firm-specific capital the Taylor principle can generate multiple equilibria. Sveen and Weinke (2005b) obtain that result in the context of a Calvo-tyle sticky price model. One potential criticism is that the price stickiness which is needed for our theoretical result to be...

What are the consequences for monetary policy design implied by the fact that price setting and investment takes typically place simultaneously at the firm level? To address this question we analyze simple (constrained) optimal interest rate rules in the context of a dynamic New Keynesian model...

We model capital accumulation in a dynamic New-Keynesian model with staggered price setting à la Calvo. It is assumed that firms do not have access to a rental market for capital. We compare our model with an alternative specification where households accumulate capital and rent it to firms....

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...