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Investment Spikes: New Facts and a General Equilibrium Exploration

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Author Info
Francois Gourio
Anil K Kashyap

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Abstract

Using plant-level data from Chile and the U.S. we show that investment spikes are highly pro-cyclical, so much so that changes in the number of establishments undergoing investment spikes (the "extensive margin") account for the bulk of variation in aggregate investment. The number of establishments undergoing investment spikes also has independent predictive power for aggregate investment, even controlling for past investment and sales. We re-calibrate the Thomas (2002) model (that includes fixed costs of investing) so that it assigns a prominent role to extensive adjustment. The recalibrated model has different properties than the standard RBC model for some shocks.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13157.

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Date of creation: Jun 2007
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Handle: RePEc:nbr:nberwo:13157

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Find related papers by JEL classification:
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. François Gourio, 2006. "Firms’ Heterogeneous Sensitivities to the Business Cycle, and the Cross-Section of Expected Returns," Boston University - Department of Economics - Working Papers Series WP2006-005, Boston University - Department of Economics. [Downloadable!]
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  2. Ruediger Bachmann & Ricardo J. Caballero & Eduardo Engel, 2008. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," Cowles Foundation Discussion Papers 1566R, Cowles Foundation, Yale University. [Downloadable!]
  3. Hanno Lustig, . "Exploring the Link between Housing and the Value Premium (joint with Stijn Van Nieuwerburgh)," UCLA Economics Online Papers 389, UCLA Department of Economics. [Downloadable!]
  4. Aubhik Khan & Julia K. Thomas, 2007. "Idiosyncratic shocks and the role of nonconvexities in plant and aggregate investment dynamics," Working Papers 07-24, Federal Reserve Bank of Philadelphia. [Downloadable!]
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  5. Francois Gourio, 2007. "Disasters and Recoveries: A Note on the Barro-Rietz Explanation of the Equity Premium Puzzle," Boston University - Department of Economics - Working Papers Series WP2007-007, Boston University - Department of Economics. [Downloadable!]
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