We use the neoclassical growth framework to model international capital flows in a world with exogenous demographic change. We compare model implications and actual current account data and find that the model explains a small but significant fraction of capital flows between OECD countries, in...

The previous literature on optimal monetary policy has focused mainly on dynamic stochastic general equilibrium models with a constant aggregate capital stock (cf. Woodford 1999; Erceg et al. 2000). In this paper, we analyze the monetary policy implications of endogenous capital accumulation. We...

A wide range of motives for holding inventories has been identified in the literature. These include the desire to smooth production in the face of fluctuating demand, the desire to avoid stockouts, and the desire to shift production into periods when costs are relatively low. Most of the...

We solve the first general equilibrium model of lumpy investment allowing a quantitative match with recent empirical evidence on establishment-level investment dynamics. In our model, establishments are subject to both persistent aggregate and persistent idiosyncratic shocks, and they face...

This paper proposes a model of endogenous fluctuations in investment. A monopolistic producer has an incentive to invest when the aggregate demand is high. This causes a propagation of investment across sectors. When the investment follows an (S,s) policy, the propagation size can exhibit a...

This paper investigates the role of financial market frictions on investment and the price of financial asset. We show that standard models with financial market imperfections can be summarized with a simple financing cost function, equal to the product of the financing premium and the amount of...

We build a partial equilibrium model of firm dynamics under exchange rate uncertainty. Firms face idiosyncratic productivity shocks and observe the current level of the real exchange rate each period. Given their current level of capital stock, firms make their export decisions and choose how...

This paper estimates a dynamic model of price discrimination and inventory investment under incomplete information. The model is motivated from an empirical analysis of operations of daily observations on inventories, sales, and purchases of over 2,300 individual products by a U.S. steel...

We develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin’s q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When insiders’ wealth is scarce, they earn a rate of...