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Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model

Author(s)
Bachmann, Rüdiger; Caballero, Ricardo J.; Engel, Eduardo M. R. A.
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Abstract
The sensitivity of US aggregate investment to shocks is procyclical. The response upon impact increases by approximately 50 percent from the trough to the peak of the business cycle. This feature of the data follows naturally from a DSGE model with lumpy microeconomic capital adjustment. Beyond explaining this specific time variation, our model and evidence provide a counterexample to the claim that microeconomic investment lumpiness is inconsequential for macroeconomic analysis.
Date issued
2013-10
URI
http://hdl.handle.net/1721.1/95965
Department
Massachusetts Institute of Technology. Department of Economics
Journal
American Economic Journal: Macroeconomics
Publisher
American Economic Association
Citation
Bachmann, Rüdiger, Ricardo J. Caballero, and Eduardo M. R. A. Engel. “ Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model.” American Economic Journal: Macroeconomics 5, no. 4 (October 2013): 29–67. © 2013 American Economic Association
Version: Final published version
ISSN
1945-7707
1945-7715

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