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Long run productivity risk and aggregate investment

Favilukis, Jack and Lin, Xiaoji (2013) Long run productivity risk and aggregate investment. Journal of Monetary Economics, 60 (6). pp. 737-751. ISSN 0304-3932

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Abstract

Long-run productivity risk - shocks to the growth rate of productivity - offers an alternative to microfrictions explanations of aggregate investment non-linearities, in particular the heteroscedasticity of investment rate. Additionally, consistent with the data, these shocks imply that investment rate is history dependent (rising through expansions), its growth is positively autocorrelated, and it is positively correlated with output growth at various leads and lags. A standard model with shocks to the level of productivity either predicts opposite investment behavior or fails to quantitatively capture these features in the data.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/03043...
Additional Information: © 2013 Elsevier B.V.
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
H Social Sciences > HG Finance
Sets: Departments > Finance
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 19 Jun 2013 13:43
URL: http://eprints.lse.ac.uk/50807/

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