An interaction-based foundation of aggregate investment fluctuations

• 成果类型: Article
• 署名作者: Nirei, Makoto
• 署名单位: Hitotsubashi University
• 刊物名称: THEORETICAL ECONOMICS
• ISSN/ISSBN: 1933-6837
• DOI: 10.3982/TE1611
• 发表日期: 2015-09-01
• 页码: 953-985
• 关键词: Business cycle; strategic complementarity; idiosyncratic shock; law of large numbers; criticality; power law

摘要

This study demonstrates that the interactions of firm-level indivisible investments give rise to aggregate fluctuations without aggregate exogenous shocks. When investments are indivisible, aggregate capital is determined by the number of firms that invest. I develop a method to derive the closed-form distribution of the number of investing firms when each firm's initial capital level varies stochastically. This method shows that idiosyncratic shocks may lead to nonvanishing aggregate fluctuations when the number of firms tends to infinity. I incorporate this mechanism in a dynamic general equilibrium model with indivisible investment and predetermined goods prices. The model features no aggregate exogenous shocks, and the fluctuation is driven by idiosyncratic productivity shocks. Numerical simulations show that the model generates aggregate fluctuations comparable to the business cycles in magnitude and correlation structure under standard calibration.