October 10, 2018
Banque de France
Séminaire Banque de France
Abstract
We develop a new framework to analyze the aggregate implications of lumpiness in microeconomic adjustment, which is pervasive in many economic environments. We derive structural relationships between the steady state moments and the business cycle dynamics of lumpy economies, and we show how to discipline these relationships using panel micro data. As an application, we study capital misallocation and investment dynamics by implementing our tools on establishment–level data from Chile and Colombia. Our framework is very flexible and can accommodate a large set of inaction models, stochastic processes, and higher order dynamics.
Keywords
inaction, transitional dynamics, adjustment costs, aggregate shocks, deviations from steady state, sufficient statistics, (S,s) models.;