Delayed Adjustment and Persistence in Macroeconomic Models

Thijs van Rens and Marija Vukotic ()

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Estimated impulse responses of investment and hiring typically peak well after the impact of a shock. Standard models with adjustment costs in capital and labor do not exhibit such delayed adjustment, but we argue that it arises naturally when we relax the assumption that the production technology is separable over time. This result holds for both non-convex and convex cost functions, and for reasonable parameter values the e⁄ect is strong enough to match the persistence observed in the data. We discuss some evidence for our explanation and ways to test the model.

Keywords: persistence; adjustment costs; organizational capital JEL codes: E24; J61; J62 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
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Journal Article: Delayed Adjustment and Persistence in Macroeconomic Models (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1245

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