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  3. American Economic Journal: Macroeconomics
  4. October 2013
  5. Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model

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

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Abstract

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.

Citation

Bachmann, Rüdiger, Ricardo J. Caballero, and Eduardo M. R. A. Engel. 2013. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model." American Economic Journal: Macroeconomics, 5 (4): 29-67. DOI: 10.1257/mac.5.4.29

Additional Materials

JEL Classification

  • E13 General Aggregative Models: Neoclassical
  • E22 Capital; Investment; Capacity
  • E32 Business Fluctuations; Cycles
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