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

Ruediger Bachmann, Ricardo Caballero () and Eduardo Engel

No 1566R, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: The sensitivity of U.S. aggregate investment to shocks is procyclical: the response upon impact increases by approximately 50% 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.

Keywords: Ss model; RBC model; Time-varying impulse response function; History dependence; Conditional heteroscedasticity; Aggregate shocks; Sectoral shocks; Idiosyncratic shocks; Adjustment costs (search for similar items in EconPapers)
JEL-codes: E10 E22 E30 E32 E62 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2008-06, Revised 2010-04
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Journal Article: Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model (2013)
Working Paper: Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model (2006)
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