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Aggregate Dynamics in Lumpy Economies

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  • Isaac Baley

    (Universitat Pompeu Fabra, CREi & Barcelona GSE)

  • Julio Blanco

    (University of Michigan)

Abstract

We develop new tools to analyze the aggregate implications of lumpiness in microeconomic adjustment. We derive a set of structural relationships between the steady state moments and the business cycle dynamics, and we show how to discipline these relationships using micro panel data. As an application, we implement our machinery in a standard framework of rm investment with xed adjustment costs. We demonstrate analytically that, in order to explain aggregate capital dynamics, that model must match two steady state moments related to capital misallocation and the time since the last investment. Using plant-level data from Chile, we compute these two moments, and discover that there does not exist a calibration of the lumpy investment model that is consistent with the data.

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  • Isaac Baley & Julio Blanco, 2019. "Aggregate Dynamics in Lumpy Economies," 2019 Meeting Papers 903, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:903
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    5. Ray, Sourav & Snir, Avichai & Levy, Daniel, 2023. "Retail Pricing Format and Rigidity of Regular Prices," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1-1.
    6. Lee, Hanbaek, 2022. "Striking While the Iron Is Cold: Fragility after a Surge of Lumpy Investments," MPRA Paper 115872, University Library of Munich, Germany.
    7. Lippi, Francesco & Alvarez, Fernando & Ferrara, Andrea & Gautier, Erwan & Le Bihan, Hervé, 2021. "Empirical Investigation of a Sufficient Statistic for Monetary Shocks," CEPR Discussion Papers 16626, C.E.P.R. Discussion Papers.
    8. Fernando Alvarez & Francesco Lippi & Aleksei Oskolkov, 2022. "The Macroeconomics of Sticky Prices with Generalized Hazard Functions [“Optimal Inattention to the Stock Market With Information Costs and Transactions Costs,”]," The Quarterly Journal of Economics, Oxford University Press, vol. 137(2), pages 989-1038.
    9. Leonard Bocquet, 2022. "The Network Origin of Slow Labor Reallocation," PSE Working Papers halshs-03703862, HAL.
    10. Leonard Bocquet, 2022. "The Network Origin of Slow Labor Reallocation," Working Papers halshs-03703862, HAL.
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    12. Fernando Alvarez & Francesco Lippi, 2022. "The Analytic Theory of a Monetary Shock," Econometrica, Econometric Society, vol. 90(4), pages 1655-1680, July.
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    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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