Year: 2026
Type: article
Abstract: We study aggregate capital dynamics in an investment model with idiosyncratic productivity shocks, fixed capital adjustment costs, and irreversibility driven by a wedge between capital purchase and resale prices. We derive sufficient statistics that capture the role of investment frictions in aggregate capital fluctuations, measure these statistics using investment microdata, and exploit them to discipline the capital price wedge. Irreversibility doubles the persistence of capital fluctuations and is crucial for reconciling micro-level investment behaviour with macroeconomic propagation.
Source: The Review of Economic Studies
Authors: Isaac Baley, Andrés Blanco
Language: English
Topic: Economic theories and models
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $6,530
Award: G1267735876
OpenAlex ID: W7123639737