Fixed Capital Adjustment
AbstractThis paper examines capital adjustment patterns using two large and largely novel data sets from the manufacturing sectors of Colombia and Mexico. The findings show that investment patterns in these countries resemble those reported for the United States to a surprising extent. Capital adjustments beyond maintenance investment occur only rarely, but large spikes account for a significant fraction of total investment. Although duration models do not provide strong evidence for the presence of substantial fixed costs, nonparametric adjustment function estimates reveal the presence of irreversibilities in investment. These irreversibilities are important for understanding aggregate investment behavior.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 99/59.
Date of creation: 01 Apr 1999
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