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Investment, Capacity, and Uncertainty: A Putty-Clay Approach

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  • Simon Gilchrist

    (Boston University)

  • John C. Williams

    (Federal Reserve Board)

Abstract

This paper introduces Heckscher-Ohlin trade features into a two-country dynamic stochastic general equilibrium model, and studies the international transmission of productivity shocks through trade in goods. This framework improves upon existing international real business cycle models in that it generates business cycle properties comparable with the empirical evidence regarding the terms of trade and the trade balance. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2004.06.002
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 8 (2005)
Issue (Month): 1 (January)
Pages: 1-27

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Handle: RePEc:red:issued:v:8:y:2005:i:1:p:1-27

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Related research

Keywords: vintage capital; irreversibility; capacity utilization; productivity;

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References

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  1. Jeffrey R. Campbell, 1997. "Computational Appendix to Entry, Exit, Embodied Technology, and Business Cycles," Technical Appendices campbell98, Review of Economic Dynamics.
  2. Chao Wei, 2003. "Energy, the Stock Market, and the Putty-Clay Investment Model," American Economic Review, American Economic Association, vol. 93(1), pages 311-323, March.
  3. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-85, December.
  4. Simon Gilchrist & John C. Williams, 2000. "Putty-Clay and Investment: A Business Cycle Analysis," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 928-960, October.
  5. Boucekkine, R. & Germain, M. & Licandro, O., . "Replacement echoes in the vintage capital growth model," CORE Discussion Papers RP -1275, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Robert S. Pindyck, 1990. "Irreversibility, Uncertainty, and Investment," NBER Working Papers 3307, National Bureau of Economic Research, Inc.
  7. John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
  8. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
  9. Simon Gilchrist & John C. Williams, 2001. "Transition dynamics in vintage capital models: explaining the postwar catch-up of Germany and Japan," Finance and Economics Discussion Series 2001-07, Board of Governors of the Federal Reserve System (U.S.).
  10. Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Springer, vol. 26(2), pages 445-469, 08.
  11. Cooley, Thomas F & Hansen, Gary D & Prescott, Edward C, 1995. "Equilibrium Business Cycles with Idle Resources and Variable Capacity Utilization," Economic Theory, Springer, vol. 6(1), pages 35-49, June.
  12. Jeffrey R. Campbell, 1997. "Entry, Exit, Embodied Technology, and Business Cycles," NBER Working Papers 5955, National Bureau of Economic Research, Inc.
  13. Jeffrey R. Campbell & Jonas D. M. Fisher, 2004. "Idiosyncratic Risk and Aggregate Employment Dynamics," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 331-353, April.
  14. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
  15. Andrew Atkeson & Patrick J. Kehoe, 1994. "Models of Energy Use: Putty-Putty versus Putty-Clay," NBER Working Papers 4833, National Bureau of Economic Research, Inc.
  16. Bernanke, Ben S, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, MIT Press, vol. 98(1), pages 85-106, February.
  17. John Y. Campbell & Martin Lettau & Burton G. Malkiel & Yexiao Xu, 2000. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," NBER Working Papers 7590, National Bureau of Economic Research, Inc.
  18. Amit Goyal & Pedro Santa-Clara, 2003. "Idiosyncratic Risk Matters!," Journal of Finance, American Finance Association, vol. 58(3), pages 975-1008, 06.
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Citations

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Cited by:
  1. Nick Bloom, 2006. "The Impact of Uncertainty Shocks: Firm Level Estimation and a 9/11 Simulation," CEP Discussion Papers dp0718, Centre for Economic Performance, LSE.
  2. Gourio, Francois & Kashyap, Anil K, 2007. "Investment spikes: New facts and a general equilibrium exploration," Journal of Monetary Economics, Elsevier, vol. 54(Supplemen), pages 1-22, September.
  3. Fahr, Stephan & Yao, Fang, 2009. "When does lumpy factor adjustment matter for aggregate dynamics?," Working Paper Series 1016, European Central Bank.
  4. Scott R. Baker & Nicholas Bloom, 2013. "Does Uncertainty Reduce Growth? Using Disasters as Natural Experiments," NBER Working Papers 19475, National Bureau of Economic Research, Inc.
  5. Chao Wei, 2013. "A Dynamic General Equilibrium Model of Driving, Gasoline Use and Vehicle Fuel Efficiency," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 650-667, October.
  6. R. Førsund, Finn & Vislie, Jon, 2011. "From Macro Growth to Disaggregated Production Studies," Memorandum 22/2011, Oslo University, Department of Economics.
  7. Thomas Gries & Stefan Jungblut & Tim Krieger & Henning Meier, 2009. "Statutory Retirement Age and Lifelong Learning," Working Papers CIE 9, University of Paderborn, CIE Center for International Economics.
  8. Jean-Marc Natal, 2010. "Monerary Policy Response to Oil Price Shocks," Working Papers 2010-15, Swiss National Bank.
  9. Martial Dupaigne, 2007. "Les variations choisies de l'utilisation du capital : une revue des implications macroéconomiques," Revue d'économie politique, Dalloz, vol. 0(2), pages 161-196.
  10. Oikawa, Koki, 2010. "Uncertainty-driven growth," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 897-912, May.

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