A Q-theory model with lumpy investment

Jianjun Miao and Pengfei Wang

Economic Theory, 2014, vol. 57, issue 1, 133-159

Abstract: We present an analytically tractable dynamic stochastic general equilibrium model that incorporates micro-level fixed and convex adjustment costs. We provide an explicit characterization of equilibrium dynamics by a system of nonlinear stochastic difference equations. We provide general conditions under which our model features investment lumpiness at the microeconomic level, but aggregate dynamics are isomorphic to those in a Q-theory model without fixed costs. This theoretical result is independent of the specification of the fixed cost distribution and also holds true when firms face persistent idiosyncratic productivity shocks. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Generalized (S; s) rule; Lumpy investment; General equilibrium; Business cycles; Marginal Q; Adjustment costs; E22; E32 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00199-013-0794-7 (text/html)
Access to full text is restricted to subscribers.

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: https://EconPapers.repec.org/RePEc:spr:joecth:v:57:y:2014:i:1:p:133-159

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-013-0794-7

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().