Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model
The sensitivity of U.S. aggregate investment to shocks is procyclical: the initial response 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.
We are grateful to Olivier Blanchard, William Brainard, Jordi Galí, Pete Klenow, John Leahy, Giuseppe Moscarini, Anthony Smith, Julia Thomas and seminar/meeting participants at the AEA (Chicago), Bonn, Cornell, Econometric Society (Bogotá), Karlsruhe, Mainz, NBER-EFG, NYU, SITE, U. de Chile (CEA) and Yale for their comments on an earlier version (April, 2006) of this paper, entitled "Lumpy Investment in Dynamic General Equilibrium." Financial support from NSF is gratefully acknowledged.
R?diger Bachmann & Ricardo J. Caballero & Eduardo M. R. A. Engel, 2013. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 29-67, October. citation courtesy of