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Discounting: Investment Sensitivity and Aggregate Implications

Author

Listed:
  • Jonathan Willis

    (Federal Reserve Bank of Kansas City)

  • Russell Cooper

    (Pennsylvania State University)

Abstract

This paper studies the effects of discounting on plant-level and aggregate investment. We study a number of date based processes to represent the state dependent discount factor. Empirically, the stochastic discount factor is procyclical. The investment decision at the plant level is sensitive to the specification of the stochastic discount factor. Non-convexities in adjustment costs at the plant level have aggregate implications: lumpy investment is not smoothed.

Suggested Citation

  • Jonathan Willis & Russell Cooper, 2015. "Discounting: Investment Sensitivity and Aggregate Implications," 2015 Meeting Papers 607, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:607
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    References listed on IDEAS

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    Cited by:

    1. Leibovici, Fernando & Waugh, Michael E., 2019. "International trade and intertemporal substitution," Journal of International Economics, Elsevier, vol. 117(C), pages 158-174.
    2. Michael Waugh & Fernando Leibovici, 2010. "Cyclical Fluctuations in International Trade Volumes," 2010 Meeting Papers 1095, Society for Economic Dynamics.

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