Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model
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The sensitivity of U.S. aggregate investment to shocks is procyclical: the response upon impact increases by approximately 50% 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.
Bachmann, Ruediger; Caballero, Ricardo J.; and Engel, Eduardo, "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model" (2006). Cowles Foundation Discussion Papers. 1857.