The endogenous relative price of investment / by Joel Wagner.: FB3-2/115-30E-PDF

This paper takes a full-information model-based approach to evaluate the link between investment-specific technology and the inverse of the relative price of investment. The two-sector model presented includes monopolistic competition where firms can vary the markup charged on their product depending on the number of firms competing. With these changes to the standard two-sector model, both total factor productivity as well as a series of non-technological shocks can impact the high-frequency volatility of the relative price of investment. Utilizing a Bayesian estimation approach to match the model to the data, we find that investment-specific technology can explain at most half of the growth rate of the relative price of investment. Last of all, we compare the benchmark model results with endogenous movement in the relative price of investment to a model where all movement in the relative price of investment is derived exogenously.

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Publication information
Department/Agency Bank of Canada.
Title The endogenous relative price of investment / by Joel Wagner.
Series title Bank of Canada working paper, 1701-9397 ; 2015-30
Publication type Series - View Master Record
Language [English]
Format Electronic
Electronic document
Note(s) "July 2015."
Includes bibliographical references.
Publishing information Ottawa : Bank of Canada, 2015.
Author / Contributor Wagner, Joel.
Description iv, 41 p. : fig., graphs, tables.
Catalogue number
  • FB3-2/115-30E-PDF
Subject terms Investments
Prices
Technological innovation
Economic analysis
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