Investment Dynamics in a DSGE Model with Heterogeneous Firms and Corporate Taxation

Sergio Salgado I.
Authors registered in the RePEc Author Service: Sergio Cristian Salgado Ibáñez, Sr.

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: In this paper I study a new business cycle fact recently documented by Bachmann and Bayer (2011): the dispersion of the distribution of investment rates across firms is procyclical. Using data from German firm, the authors find a correlation coefficient between the standard deviation of investment distribution and the cyclical component of output of 0.45. They also report a correlation coefficient for US economy of 0.33. Using a model similar to Khan and Thomas's (2003), that is standard to heterogeneous firms literature, I obtain a correlation coefficient of 0.57. In the model I also consider a government sector that collects taxes on corporate profits. In such model, with a corporate tax of 23.5%, which corresponds to German economy, I obtain a correlation coefficient of 0.46 and when I consider a corporate tax rate of 18.79% that corresponds to US economy I find a correlation coefficient of 0.51.

Date: 2011-08
New Economics Papers: this item is included in nep-acc, nep-bec and nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:638

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