scholarly journals The Market for Used Capital: Endogenous Irreversibility and Reallocation over the Business Cycle

2018 ◽  
Vol 108 (9) ◽  
pp. 2383-2419 ◽  
Author(s):  
Andrea Lanteri
Keyword(s):  
Business Cycle ◽  
Adjustment Costs ◽  
Physical Capital ◽  
Firm Level ◽  
Secondary Markets ◽  
Equilibrium Dynamics ◽  
Capital Adjustment ◽  
State Dependent ◽  
The Business Cycle ◽  
Investment Goods

This paper studies the business-cycle dynamics of secondary markets for physical capital and their effects on the macroeconomy. In the data, both capital reallocation and the price of used capital are procyclical. To rationalize these facts, I propose a model with endogenous partial irreversibility, where used investment goods are imperfect substitutes for new ones because of firm-level capital specificity. Equilibrium dynamics in the market for used capital induce countercyclical dispersion of marginal products of capital, propagate movements in aggregate TFP, and provide a microfoundation for state-dependent nonconvex capital adjustment costs. (JEL E22, E23, E32, G31)

scholarly journals Investment Dispersion and the Business Cycle

2014 ◽  
Vol 104 (4) ◽  
pp. 1392-1416 ◽  
Author(s):  
Rüdiger Bachmann ◽  
Christian Bayer
Keyword(s):  
Business Cycle ◽  
Adjustment Costs ◽  
Firm Risk ◽  
Firm Level ◽  
Cross Sectional ◽  
Capital Adjustment ◽  
Investment Rates ◽  
Business Cycle Model ◽  
The Business Cycle ◽  
Heterogeneous Firm

The cross-sectional dispersion of firm-level investment rates is procyclical. This makes investment rates different from productivity, output, and employment growth, which have countercyclical dispersions. A calibrated heterogeneous-firm business cycle model with nonconvex capital adjustment costs and countercyclical dispersion of firm-level productivity shocks replicates these facts and produces a correlation between investment dispersion and aggregate output of 0.53, close to 0.45 in the data. We find that small shocks to the dispersion of productivity, which in the model constitutes firm risk, suffice to generate the mildly procyclical investment dispersion in the data but do not produce serious business cycles. (JEL D42, D92, E32, G31, G32)

scholarly journals A Search-Theoretic Monetary Business Cycle Model with Capital Formation

2006 ◽  
Vol 6 (1) ◽  
pp. 1-36 ◽  
Author(s):  
Martin Menner
Keyword(s):  
Business Cycle ◽  
Adjustment Costs ◽  
Capital Formation ◽  
Propagation Mechanism ◽  
Monetary Model ◽  
Search Intensity ◽  
Capital Adjustment ◽  
Inventory Investment ◽  
Business Cycle Model ◽  
Divisible Goods

Search-theory has become the main paradigm for the micro-foundation of money. But no comprehensive business cycle analysis has been undertaken yet with a search-based monetary model. This paper extends the model with divisible goods and divisible money of Shi (JET, 1998) to allow for capital formation, analyses the monetary propagation mechanism and contrasts the model's implications with US business cycle stylized facts. The propagation mechanism based on a feedback between increased search intensity and depleted inventories only survives in the presence of non-negligible capital adjustment costs. With intermediate adjustment costs the model is able to replicate fairly well the volatility and cross-correlation with output of key US time series, including sales and inventory investment.

Markups, Aggregation, and Inventory Adjustment

2004 ◽  
Vol 94 (5) ◽  
pp. 1328-1353 ◽  
Author(s):  
Daniele Coen-Pirani
Keyword(s):  
Business Cycle ◽  
Aggregate Data ◽  
Firm Level ◽  
Partial Adjustment ◽  
Sector Model ◽  
Level Data ◽  
Firm Level Data ◽  
Downward Bias ◽  
Rapid Reaction ◽  
The Business Cycle

In this paper I suggest a unified explanation for two puzzles in the inventory literature: first, estimates of inventory speeds of adjustment in aggregate data are very small relative to the apparent rapid reaction of stocks to unanticipated variations in sales. Second, estimates of inventory speeds of adjustment in firm-level data are significantly higher than in aggregate data. The paper develops a multi-sector model where inventories are held to avoid stockouts, and price markups vary along the business cycle. The omission of countercyclical markup variations from inventory targets introduces a downward bias in estimates of adjustment speeds obtained from partial adjustment models. When the cyclicality of markups differs across sectors, this downward bias is shown to be more severe with aggregate rather than firm-level data. Similar results apply not only to inventories, but also to labor and prices. Montercarlo simulations of a calibrated version of the model suggest that these biases are quantitatively significant.

scholarly journals Adjustment Costs and Nominal Rigidities in a Small Open Economy / Anpassungskosten und nominelle Rigiditäten in einer kleinen offenen Volkswirtschaft

2002 ◽  
Vol 222 (4) ◽  
Author(s):  
Alfred Maußner
Keyword(s):  
Time Series ◽  
Utility Function ◽  
Open Economy ◽  
Small Open Economy ◽  
Adjustment Costs ◽  
Monetary Shocks ◽  
Firm Level ◽  
Current Period ◽  
The Business Cycle ◽  
Simulated Time

SummaryWhat does account for the persistence of monetary shocks in dynamic general equilibrium models of the business cycle? A number of papers have dealt with that question and point at labor market frictions besides those introduced by overlapping wage contracts.In this paper I investigate an obvious source of persistence, namely small adjustment costs of labor at the firm level. These introduce indeed hump shaped impulse responses of hours worked in simulated time series. Compared with a benchmark model without nominal and real frictions my model outperforms the former in most respects.However, its account of the time series properties of monetary variables is not satisfactory. This holds true for closely related models that change the current period utility function, that introduce money into the utility function, or that posit a cash in advance constraint. I take this as suggestive to think about more sophisticated models of money demand.

scholarly journals Large Firm Dynamics and the Business Cycle

2019 ◽  
Vol 109 (4) ◽  
pp. 1375-1425 ◽  
Author(s):  
Vasco M. Carvalho ◽  
Basile Grassi
Keyword(s):  
Business Cycle ◽  
Size Distribution ◽  
Firm Size ◽  
Large Firm ◽  
Firm Dynamics ◽  
Aggregate Fluctuations ◽  
Firm Level ◽  
Firm Size Distribution ◽  
The Business Cycle

Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer an analytical characterization of the law of motion of the aggregate state in this class of models, the firm size distribution, and show that aggregate output and productivity dynamics display: (i ) persistence, (ii ) volatility, and (iii ) time-varying second moments. We explore the key role of moments of the firm size distribution, and, in particular, the role of large firm dynamics, in shaping aggregate fluctuations, theoretically, quantitatively, and in the data. (JEL D21, D22, D24, E32, L11)

scholarly journals Capital Buffer dan Faktor Penentunya di Indonesia

2020 ◽  
Vol 10 (2) ◽  
pp. 132
Author(s):  
Abel Tasman
Keyword(s):  
Business Cycle ◽  
Sample Selection ◽  
Adjustment Costs ◽  
Capital Adequacy ◽  
Bank Capital ◽  
Going Public ◽  
Capital Adequacy Ratio ◽  
Two Factors ◽  
The Difference ◽  
The Business Cycle

Capital buffer is defined as the difference between the bank's capital ratio and the capital adequacy ratio (Capital Adequacy Ratio) or CAR imposed by the Central Bank. Capital buffers can be used as capital reserves in times of various economic shocks so as to minimize risks faced by banks. A bank that has a high capital buffer reflects a high CAR as well, while a CAR that is too high is also not profitable for the bank, because this capital should be used for lending and investing in an effort to maximize profits. This study aims to determine the determinants of going public banking capital buffer in Indonesia for the period 2014 to 2018. The sample selection is based on purposive. Acting as the dependent variable is the capital buffer and the independent variables are ROE, NPL, Lag of capital buffer (〖BUFF〗 _ (t-1)), Size and GDP. This study used  multiple regression analysis. The results of this study indicate that the selected determinants of the capital buffer of going public banking in Indonesia are adjustment costs and the business cycle. Adjustment costs have a positive and significant effect on the capital buffer of going public banking in Indonesia and the business cycle has a negative and significant effect on the capital buffer of go public banking. public in Indonesia. Thus, the sample companies can optimize their capital buffer which can be ideal in order to maximize profits by considering the two factors above.

Italy’s Economic Policy in the Age of the Euro

1999 ◽  
Vol 17 (2) ◽  
pp. 167-189
Author(s):  
Salvatore Zecchini
Keyword(s):  
Monetary Policy ◽  
Economic Policy ◽  
Fiscal Policy ◽  
Business Cycle ◽  
Adjustment Costs ◽  
Full Spectrum ◽  
Social Resistance ◽  
Critical Issues ◽  
The Business Cycle

Abstract Italy’s participation in the EMU entails majors shifts in its economic policy approach, involving the full spectrum of policy domains, and not just the monetary area alone. The author presents an overview of the main changes, highlighting a number of critical issues that have emerged. Italy’s need for higher growth over the business cycle can hardly be met through a unified monetary policy that is attuned to the requirements of the larger and more developed part of the Eurozone. Extensive constraints stemming from EMU on fiscal policy and other adjustment tools leave die country no choice but to press ahead with far-reaching reforms of its structures and markets. But progress in this direction is hampered by social resistance and inadequate mechanisms to ease adjustment costs. Under these conditions, the partial policy co-ordination stemming from EMU raises for Italy problems of sustainability over the longer term, especially in prolonged phases of stagnation or recession.

Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited

2019 ◽  
Vol 20 (4) ◽  
pp. e730-e758 ◽  
Author(s):  
Christopher Heiberger ◽  
Halvor Ruf
Keyword(s):  
Business Cycle ◽  
Capital Accumulation ◽  
Adjustment Costs ◽  
Building Blocks ◽  
Asset Markets ◽  
Dsge Models ◽  
Additional Degree ◽  
Dynamic Stochastic ◽  
The Business Cycle ◽  
Premium Puzzle

Abstract This paper discusses the advantages of Epstein and Zin (1989) (EZ) preferences when building dynamic stochastic general equilibrium (DSGE) models that are consistent with well-known stylized facts of both the business cycle and asset markets. To this end, we combine EZ preferences with several building blocks from the DSGE literature that has tried to solve the equity premium puzzle and to replicate characteristic statistics of the labor market. Our goal is to guide researchers in this area to useful modeling devices and to discuss EZ preferences vis-a-vis the standard time-additive expected utility function. EZ preferences separate the attitude toward risk from the attitude toward intertemporal substitution. We demonstrate that this additional degree of freedom allows us to closely match the empirical facts already in a frictionless production economy with endogenous labor supply. Our study follows Heer and Maußner (2013). We examine models that consider adjustment costs of capital accumulation, consumption habits, and frictions in the allocation of labor. Our empirical targets are estimated from German data.

Sign in / Sign up

Export Citation Format

Share Document