Aggregate Dynamics in Lumpy Economies

Andrés Blanco and Isaac Baley

No 1116, Working Papers from Barcelona School of Economics

Abstract: In economies with lumpy microeconomic adjustment, we establish structural relationships between the dynamics of the cross-sectional distribution of agents and its steady-state counterpart and discipline these relationships using micro data. Applying our methodology to firm lumpy investment, we discover that the dynamics of aggregate capital are structurally linked to two cross-sectional moments of the capital-to-productivity ratio: its dispersion and its covariance with the time elapsed since the last adjustment. We compute these sufficient statistics using plant–level data on the size and frequency of investments. We find that, in order to explain investment dynamics, the benchmark model with fixed adjustment costs must also feature a precise combination of irreversibility and random opportunities of free adjustment.

Keywords: transitional dynamics; inaction; lumpiness; non convex adjustment costs; sufficient statistics; firm investment; adjustment hazard; Ss models (search for similar items in EconPapers)
JEL-codes: D30 D80 E20 E30 (search for similar items in EconPapers)
Date: 2019-09
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Aggregate Dynamics in Lumpy Economies (2021)
Working Paper: Aggregate Dynamics in Lumpy Economies (2019)
Working Paper: Aggregate dynamics in lumpy economies (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1116

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