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Isaac Baley Gaytán - Universitat Pompeu Fabra
Thursday 21 March 2019, 04:30pm - 06:00pm

Aggregate Dynamics in Lumpy Economies (joint with Andrés Blanco)

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 firm investment with fixed 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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