Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83630
Authors: 
Reiff, Ádám
Year of Publication: 
2010
Series/Report no.: 
MNB Working Papers 2010/2
Abstract: 
This paper uses Hungarian data to estimate the structural parameters of a firm-level investment model with a rich structure of adjustment costs, and analyzes whether non-convex adjustment costs have any effect on the aggregate investment dynamics. The main question addressed is whether aggregate profitability shocks (as a result of monetary policy, for example) lead to different aggregate investment dynamics under non-convex and convex adjustment costs. The main finding is that while non-convex adjustment costs make investment lumpier at the firmlevel, they lead to a more flexible adjustment pattern at the aggregate level. This is because the model is calibrated to have the same proportion of inactive (i.e. non-investing) firms under convex and non-convex adjustment costs, but the average size of new investment of active firms is higher under nonconvex ,adjustment costs.
Subjects: 
Capital Adjustment Costs
Lumpy Investment
Irreversible Investment
Aggregation
JEL: 
E22
Document Type: 
Working Paper

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