Discounting: Investment Sensitivity and Aggregate Implications
Jonathan Willis and
Russell Cooper
No 607, 2015 Meeting Papers from Society for Economic Dynamics
Abstract:
This paper studies the effects of discounting on plant-level and aggregate investment. We study a number of date based processes to represent the state dependent discount factor. Empirically, the stochastic discount factor is procyclical. The investment decision at the plant level is sensitive to the specification of the stochastic discount factor. Non-convexities in adjustment costs at the plant level have aggregate implications: lumpy investment is not smoothed.
Date: 2015
New Economics Papers: this item is included in nep-mac
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