Title: Plant-Level Adjustment and Aggregate Investment Dynamics
Abstract:THE EMPIRICAL INVESTMENT literature is full of disappointments.From time to time waves of new ideas challenge the aggregate investment equation, but these challenges are rarely successful, and progres...THE EMPIRICAL INVESTMENT literature is full of disappointments.From time to time waves of new ideas challenge the aggregate investment equation, but these challenges are rarely successful, and progress is, at best, slow.There are serious theoretical obstacles, stemming mostly from the richness of the cross-sectional and time-series scenarios faced by actual investors, from the complexity of the investment technologies available to them, and from the myriad incentive problems that these economic agents face.There are at least as complex, and perhaps insurmountable, data problems.Both right-and left-hand side variables are seldom measured properly.'In spite of this pessimistic picture, this paper makes a new attempt. By building from the microeconomic actions of individual plants, itWe thank Summer Institute 1995 (EFCCL) participants Kevin Hassett and Austan Goolsbee for providing us with data, and Lucia Foster and Catherine Buffington for excellent research assistance.Read More