Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223508
Authors: 
Zorn, Peter
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8436
Abstract: 
Macroeconomic and sector-specific shocks exert differential effects on investment in disaggregate sectoral data. The response to macroeconomic shocks is hump-shaped, just as in aggregate data. The effects of sectoral innovations decrease monotonically. A calibrated model of investment with convex capital adjustment costs and rational inattention explains these features of the data. The model matches the empirical responses of sectoral investment because learning about shocks generates additional investment demand over time, and more so after aggregate shocks with relatively higher persistence. The interaction of information frictions and physical adjustment costs is key to this result.
Subjects: 
investment dynamics
hump shape
rational inattention
adjustment costs
JEL: 
E22
E32
D25
D83
C38
Document Type: 
Working Paper

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