Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/309188 
Year of Publication: 
2024
Series/Report no.: 
Working Paper No. 2024-17
Publisher: 
Federal Reserve Bank of Atlanta, Atlanta, GA
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 capturing the role of investment frictions on aggregate capital fluctuations, measure these statistics with 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 behavior with macroeconomic propagation.
Subjects: 
investment frictions
capital price wedge
irreversibility
lumpiness
fixed adjustment costs
capital misallocation
Tobin's q
transitional dynamics
inaction
propagation
JEL: 
D30
D80
E20
E30
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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