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

Ruediger Bachmann, Ricardo J Caballero () and Eduardo M.R.A. Engel ()
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Ruediger Bachmann: Yale University

No 1566R, Cowles Foundation Discussion Papers from Cowles Foundation, Yale University

Abstract: The sensitivity of U.S. aggregate investment to shocks is procyclical: the initial response increases by approximately 50% from the trough to the peak of the business cycle. This feature of the data follows naturally froma 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.

Keywords: Ss model; RBC model; Time-varying impulse response function; History dependence; Conditional heteroscedasticity; Aggregate shocks; Sectoral shocks; Idiosyncratic shocks; Adjustment costs (search for similar items in EconPapers)
JEL-codes: E10 E22 E30 E32 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge and nep-mac
Date: Written
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Working Paper: Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model (2006)
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