Aggregate Dynamics in Lumpy Economies

Isaac Baley and Andrés Blanco

Econometrica, 2021, vol. 89, issue 3, 1235-1264

Abstract: How does an economy's capital respond to aggregate productivity shocks when firms make lumpy investments? We show that capital's transitional dynamics are structurally linked to two steady‐state moments: the dispersion of capital to productivity ratios—an indicator of capital misallocation—and the covariance of capital to productivity ratios with the time elapsed since their last adjustment—an indicator of asymmetric costs of upsizing and downsizing the capital stock. We compute these two sufficient statistics using data on the size and frequency of investment of Chilean plants. The empirical values indicate significant effects of aggregate productivity shocks and favor investment models with a strong downsizing rigidity and random opportunities for free adjustments.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://doi.org/10.3982/ECTA17344

Related works:
Working Paper: Aggregate Dynamics in Lumpy Economies (2019)
Working Paper: Aggregate Dynamics in Lumpy Economies (2019)
Working Paper: Aggregate dynamics in lumpy economies (2019)
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:wly:emetrp:v:89:y:2021:i:3:p:1235-1264

Ordering information: This journal article can be ordered from
https://www.economet ... ordering-back-issues

Access Statistics for this article

Econometrica is currently edited by Guido W. Imbens

More articles in Econometrica from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().