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

49 Pages Posted: 16 Jun 2008 Last revised: 2 Mar 2011

See all articles by Ruediger Bachmann

Ruediger Bachmann

Yale University

Ricardo J. Caballero

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Eduardo M. R. A. Engel

Yale University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2010

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, ourmodel and evidence provide a counterexample to the claim that microeconomic investment lumpiness is inconsequential for macroeconomic analysis.

Keywords: Ss model, RBC model, Time-varying impulse response function, History dependence, Conditional heteroscedasticity, Aggregate shocks, Sectoral shocks, Idiosyncratic shocks, Adjustment costs

JEL Classification: E10, E22, E30, E32, E62

Suggested Citation

Bachmann, Ruediger and Caballero, Ricardo J. and Engel, Eduardo M., Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model (June 1, 2010). Cowles Foundation Discussion Paper No. 1566R, Available at SSRN: https://ssrn.com/abstract=1146452 or http://dx.doi.org/10.2139/ssrn.1146452

Ruediger Bachmann

Yale University ( email )

New Haven, CT 06520
United States

Ricardo J. Caballero

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Building E52-528
Cambridge, MA 02142
United States
617-253-0489 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Eduardo M. Engel (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States
203-432-5595 (Phone)
203-432-5779 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
72
Abstract Views
1,675
rank
347,918
PlumX Metrics