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Time to Build and the Business Cycle

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  • Meier, Matthias

Abstract

Investment is central for business cycles and a key characteristic of investment is time to build (TTB). I document that TTB is volatile and largest during recessions. To study these fluctuations, I develop a model. In the model, the longer TTB, the less frequently firms invest, and the less investment reflects productivity, which worsens the allocation of capital. In the calibrated model, one month longer TTB lowers GDP by 0.5%. Empirical evidence corroborates the quantitative results.

Suggested Citation

  • Meier, Matthias, 2017. "Time to Build and the Business Cycle," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168059, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc17:168059
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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