Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model

Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model

The sensitivity of US aggregate investment to shocks is procyclical. The response upon impact increases by approximately 50 percent from the trough to the peak of the business cycle. This feature of the data follows naturally from a DSGE model with lumpy microeconomic capital adjustment. Beyond expl...

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Bibliographic Details
Main Authors: Bachmann, Rüdiger (Author), Caballero, Ricardo J. (Contributor), Engel, Eduardo M. R. A. (Author)
Other Authors: Massachusetts Institute of Technology. Department of Economics (Contributor)
Format: Article
Language:English
Published: American Economic Association, 2015-03-11T20:01:07Z.
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Summary:The sensitivity of US aggregate investment to shocks is procyclical. The response upon impact increases by approximately 50 percent from the trough to the peak of the business cycle. This feature of the data follows naturally from a DSGE model with lumpy microeconomic capital adjustment. Beyond explaining this specific time variation, our model and evidence provide a counterexample to the claim that microeconomic investment lumpiness is inconsequential for macroeconomic analysis.
National Science Foundation (U.S.) (SES 0550134)

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