DECOMPOSING THE CYCLICAL MOVEMENTS IN THE REAL PRICE OF EQUIPMENT

Decomposing the Cyclical Movements in the Real Price of Equipment

This paper raises warning flags about the current use of the real price of equipment as the driving process for investment-specific technology in the Real-Business-Cycle (RBC) model.Using a structural VAR Mushroom Drinks approach, this paper finds that a significant fraction of the real price of equipment is accounted for by other shocks besides in

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