Article

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

07/2006;
Source: RePEc

ABSTRACT The sensitivity of U.S. aggregate investment to shocks is procyclical: the initial response 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.

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Keywords

business cycle
 
counterexample
 
DSGE model
 
lumpy microeconomic capital adjustment
 
macroeconomic analysis
 
specific time variation
 
trough