Document Type
Discussion Paper
Publication Date
6-1-2006
CFDP Number
1566R
CFDP Update Date
2010-04-01
CFDP Pages
48
Abstract
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.
Recommended Citation
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.
https://elischolar.library.yale.edu/cowles-discussion-paper-series/1857