This paper explores investment fluctuations due to discrete changes in a plant's capital stock. The resulting aggregate investment dynamics are surprisingly rich, reflecting the interaction between a replacement cycle, the cross-sectional distribution of the age of the capital stock, and an aggregate shock. Using plant-level data, lumpy investment is procyclical and more likely for older capital. Further, the predicted path of aggregate investment that neglects vintage effects tracks actual aggregate investment reasonably well.
Machine Replacement and the Business Cycle: Lumps and BumpsRussell Cooper, John C. Haltiwanger, and Laura Power ,
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American Economic Review