EconPapers    
Economics at your fingertips  
 

Investment Hangover and the Great Recession

Matthew Rognlie, Andrei Shleifer and Alp Simsek

American Economic Journal: Macroeconomics, 2018, vol. 10, issue 2, 113-53

Abstract: We present a model of investment hangover motivated by the Great Recession. Overbuilding of durable capital such as housing requires a reallocation of productive resources to other sectors, which is facilitated by a reduction in the interest rate. When monetary policy is constrained, overbuilding induces a demand-driven recession with limited reallocation and low output. Investment in other capital initially declines due to low demand, but it later booms and induces an asymmetric recovery in which the overbuilt sector is left behind. Welfare can be improved by ex post policies that stimulate investment (including in overbuilt capital) and ex ante policies that restrict investment.

JEL-codes: E22 E23 E32 E43 E52 R21 R31 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mac.20160211
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20160211 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... Z6kFVD8G7KR6qQQJg4ql (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... 4MoVjU2xb1xg_O5FtTQS (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... LAJn4uTBglLQBnZ3H7oK (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Investment Hangover and the Great Recession (2015) Downloads
Working Paper: Investment Hangover and the Great Recession (2014) Downloads
Working Paper: Investment Hangover and the Great Recession (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:10:y:2018:i:2:p:113-53

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2025-03-31
Handle: RePEc:aea:aejmac:v:10:y:2018:i:2:p:113-53