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Nonconvex factor adjustments in equilibrium business cycle models: do nonlinearities matter?

Aubhik Khan () and Julia Thomas

No 00-10, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Using an equilibrium business cycle model, the authors search for aggregate nonlinearities arising from the introduction of nonconvex capital adjustment costs. The authors find that while such adjustment costs lead to nontrivial nonlinearities in aggregate investment demand, equilibrium investment is effectively unchanged. This finding, based on a model in which aggregate fluctuations arise through exogenous changes in total factor productivity, is robust to the introduction of shocks to the relative price of investment goods.

Keywords: Business; cycles (search for similar items in EconPapers)
Date: 2000, Revised 2000
New Economics Papers: this item is included in nep-dge
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Related works:
Journal Article: Nonconvex factor adjustments in equilibrium business cycle models: do nonlinearities matter? (2003) Downloads
Working Paper: Nonconvex factor adjustments in equilibrium business cycle models: Do nonlinearities matter? (2002) Downloads
Working Paper: Nonconvex Factor Adjustments in Equilibrium Business Cycle Models: Do Nonlinearities Matter? Downloads
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