English, Article, Journal or magazine article edition: When does Lumpy Factor Adjustment Matter for Aggregate Dynamics? Stephan Fahr; Fang Yao

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Bookmark: http://trove.nla.gov.au/version/211444
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • When does Lumpy Factor Adjustment Matter for Aggregate Dynamics?
Author
  • Stephan Fahr
  • Fang Yao
Physical Description
  • preprint
Notes
  • We analyze the dynamic effects of lumpy factor adjustments at the firm level onto the aggregate economy. We find that distinguishing between capital and labour as lumpy factors within the production function result in very different dynamics for aggregate output, investment and labour in an otherwise standard real business cycle model. Lumpy capital leaves the RBC dynamics mainly unchanged, while lumpy labour allows for persistence and an inner propagation within the model in form of hump-shaped impulse responses. In addition, when modeling lumpy adjustments on both investment and labour, the aggregate effects are even stronger. We investigate the mechanisms underlying these results and identify the elasticity of factor supply as the most important element in accounting for these differences. JEL Classification: E32, E22, E24.
  • Lumpy labor adjustment, Lumpy investment, Business cycles, Elasticity of supply.
  • RePEc:ecb:ecbwps:200901016
Language
  • English
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