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http://ssrn.com/abstract=1211117
 
 

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Investment Spikes: New Facts and a General Equilibrium Exploration


Francois Gourio


Boston University

Anil K. Kashyap


University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER); Federal Reserve Bank of Chicago

May 1, 2007

Chicago GSB Research Paper No. 7

Abstract:     
Using plant-level data from Chile and the U.S. we show that investment spikes are highly pro-cyclical, so much so that changes in the number of establishments undergoing investment spikes (the "extensive margin") account for the bulk of variation in aggregate investment. The number of establishments undergoing investment spikes also has independent predictive power for aggregate investment, even controlling for past investment and sales. We re-calibrate the Thomas (2002) model (that includes fixed costs of investing) so that it assigns a prominent role to extensive adjustment. The recalibrated model has different properties than the standard RBC model for some shocks.

Number of Pages in PDF File: 48

Keywords: adjustment costs, investment, investment tax credit, fixed costs, extensive margin

JEL Classification: E22, E32

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Date posted: August 8, 2008  

Suggested Citation

Gourio, Francois and Kashyap, Anil K., Investment Spikes: New Facts and a General Equilibrium Exploration (May 1, 2007). Chicago GSB Research Paper No. 7. Available at SSRN: http://ssrn.com/abstract=1211117 or http://dx.doi.org/10.2139/ssrn.1211117

Contact Information

Francois Gourio
Boston University ( email )
270 Bay State Road
Boston, MA 02215
United States
HOME PAGE: http://htttp://people.bu.edu/fgourio
Anil K. Kashyap (Contact Author)
University of Chicago, Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7260 (Phone)
773 702-0458 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-7260 (Phone)
773-702-0458 (Fax)
Federal Reserve Bank of Chicago ( email )
230 South LaSalle Street
Chicago, IL 60604
United States
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