Frictions in Physical Capital Markets as a Propagation Mechanism

@inproceedings{Kurmann2007FrictionsIP,
  title={Frictions in Physical Capital Markets as a Propagation Mechanism},
  author={Andr{\'e} Kurmann and Nicolas Petrosky-Nadeau},
  year={2007}
}
We build a Dynamic General Equilibrium model with search frictions for the allocation of physical capital and investigate its implications for the business cycle. While the model is in principle capable of generating substantial internal propagation to small exogenous shocks, the quantitative effects are modest once we calibrate the model to fit firm-level… CONTINUE READING