The seminar will be held at 10 am in Széchenyi room.
Discussant: Gábor Kátay, Zoltán Wolf
Abstract
This paper uses Hungarian data to estimate the structural parameters of a firm-level investment model with a rich structure of adjustment costs, and analyzes whether non-convex adjustment costs have any effect on the aggregate investment dynamics. The main question addressed is whether aggregate profitability shocks (as a result of monetary policy, for example) lead to different aggregate investment dynamics under non-convex and convex adjustment costs. The main finding is that while non-convex adjustment costs make investment lumpier at the firm level, they lead to a more flexible adjustment pattern at the aggregate level. This can be explained by the fact that in an investment model with relatively cheap replacement investment, the proportion of non-adjusting firms is similar under convex and non-convex adjustment costs, while the average size of new investment of active firms is higher under non-convex adjustment costs.