Plant-Level Irreversible Investment and Equilibrium Business Cycles
American Economic Review
vol. 92,
no. 1, March 2002
(pp. 181-197)
Abstract
This paper evaluates the importance of microeconomic irreversibilities for aggregate dynamics using a real-business-cycle (RBC) model characterized by investment irreversibilities at the establishment level. The main finding is that investment irreversibilities do not play a significant role in an otherwise standard realbusiness-cycle model: Even though investment irreversibilities are crucial for establishment-level dynamics, aggregate fluctuations are basically the same under fully flexible or completely irreversible investment. (JEL E22, E32)Citation
Veracierto, Marcelo, L. 2002. "Plant-Level Irreversible Investment and Equilibrium Business Cycles ." American Economic Review, 92 (1): 181-197. DOI: 10.1257/000282802760015667JEL Classification
- E22 Capital; Investment; Capacity
- E32 Business Fluctuations; Cycles
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity