Investment Dynamics in a DSGE Model with Heterogeneous Firms and Corporate Taxation
AbstractIn this paper I study a new business cycle fact recently documented by Bachmann and Bayer (2011): the dispersion of the distribution of investment rates across firms is procyclical. Using data from German firm, the authors find a correlation coefficient between the standard deviation of investment distribution and the cyclical component of output of 0.45. They also report a correlation coefficient for US economy of 0.33. Using a model similar to Khan and Thomas's (2003), that is standard to heterogeneous firms literature, I obtain a correlation coefficient of 0.57. In the model I also consider a government sector that collects taxes on corporate profits. In such model, with a corporate tax of 23.5%, which corresponds to German economy, I obtain a correlation coefficient of 0.46 and when I consider a corporate tax rate of 18.79% that corresponds to US economy I find a correlation coefficient of 0.51.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 638.
Date of creation: Aug 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ACC-2011-09-05 (Accounting & Auditing)
- NEP-ALL-2011-09-05 (All new papers)
- NEP-BEC-2011-09-05 (Business Economics)
- NEP-DGE-2011-09-05 (Dynamic General Equilibrium)
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