Plant-Level Irreversible Investment and Equilibrium Business Cycles

Marcelo Veracierto

American Economic Review, 2002, vol. 92, issue 1, 181-197

Abstract: This paper evaluates the importance of microeconomic irreversibilities for aggregate dynamics using a real-business-cycle (RBC) model characterized by investment irreversibilities at the establishment level. The main finding is that investment irreversibilities do not play a significant role in an otherwise standard realbusiness-cycle model: Even though investment irreversibilities are crucial for establishment-level dynamics, aggregate fluctuations are basically the same under fully flexible or completely irreversible investment. (JEL E22, E32)

Date: 2002
Note: DOI: 10.1257/000282802760015667
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Related works:
Working Paper: Plant level irreversible investment and equilibrium business cycles (1998)
Working Paper: Plant level irreversible investment and equilibrium business cycles (1997)
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