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Irreversibility and Aggregate Investment
Abstract
Investment is often irreversible: once installed, capital has little or no value unless used in production. This paper proposes and solves a model of sequential irreversible investment and characterizes the aggregate implications of microeconomic irreversibility and idiosyncratic uncertainty. If a large amount of idiosyncratic uncertainty is allowed for, the distributional dynamics induced by the nonlinear character of irreversible investment policies are capable of smoothing the dynamics of aggregate investment (relative to those of its forcing processes) to the extent required by U.S. data.
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Citations
Cited by
Explaining Investment Dynamics in U.S. Manufacturing: A Generalized (S, s) Approach
Caballero, R. J., & Engel, E. M. R. A. (1999) · Econometrica · doi:10.1111/1468-0262.00053 · Cited by 499
Self-citationDoes Uncertainty Reduce Growth? Using Disasters as Natural Experiments
Baker, S., & Bloom, N. (2013) · National Bureau of Economic Research · doi:10.3386/w19475 · Cited by 349
Does Speculation in Financial Markets Have Real Effects?
Li, T., & Loewenstein, M. (2014) · doi:10.2139/ssrn.2423360 · Cited by 4
Metadata
- Authors
- Bertola, G., & Caballero, R. J.
- Venue
- The Review of Economic Studies
- Publisher
- Oxford University Press (OUP)
- Published
- 1994-04-01
- Volume
- 61
- Issue
- 2
- Pages
- 223-246
- ISSN
- 0034-6527 (ISSN-L)
- 1467-937X
- OpenAlex
- W2889926085
- Cited by
- 460
- References
- 0
- FWCI
- 15.64
- Type
- journal article
- Language
- en
- Open access
- closed
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- CoChat. (2026). Citation check: Irreversibility and Aggregate Investment. https://app.cochat.ai/papers/10.2307/2297979
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- Bertola, G., & Caballero, R. J. (1994). Irreversibility and Aggregate Investment. The Review of Economic Studies. https://doi.org/10.2307/2297979
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
