Economics at your fingertips  

Fixed costs and long-lived investments

Christopher L. House

Journal of Monetary Economics, 2014, vol. 68, issue C, 86-100

Abstract: Fixed costs models are difficult to analyze because they feature non-degenerate, time-varying distributions of capital across firms. If investments are sufficiently long-lived however then the cross-sectional distribution of capital holdings has virtually no bearing on the equilibrium and the aggregate behavior of fixed-cost models is essentially identical to neoclassical models. The findings are due to a near infinite elasticity of investment timing for long-lived investments – a feature shared by fixed-cost models and neoclassical models. “Irrelevance results” found in numerical studies of fixed-cost models are not parametric special cases but instead are fundamental properties of models with long-lived investment goods.

Keywords: Fixed costs; Aggregation; Irrelevance; Elasticity of investment demand (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
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:

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Series data maintained by Dana Niculescu ().

Page updated 2017-09-29
Handle: RePEc:eee:moneco:v:68:y:2014:i:c:p:86-100