A novel specification of the time-to-build (TTB) assumption is presented where firms invest in many projects that have complementarities, and the duration of the investment projects is uncertain. The model yields to a gradual (hump-shaped) response of investment to shocks, and it is shown to be equivalent, up to first-order linearization, to investment adjustment cost models where the cost of adjustment directly depends on the change in investment levels. The paper discusses how the new TTB specification is consistent with empirical features of investment decisions both at the aggregate and more disaggregated levels.
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- Altug, Sumru, 1989.
"Time-to-Build and Aggregate Fluctuations: Some New Evidence,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 889-920, November.
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"Output Dynamics in Real-Business-Cycle Models,"
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