-2000 sample, the initial response of investment to a productivity shock with responses in the top quartile is 60% higher than the … shock. Conversely, a slowdown after a boom can lead to a long lasting investment slump, which is unresponsive to policy … smoothing in the investment response to aggregate shocks. The remaining 40% is explained by general equilibrium forces. The …

and almost 78 percent of investment fluctuations are explained by the external shocks. We also find that the propagation … productivity shocks. While positive domestic productivity shocks induce short-lived economic expansions, adverse external shocks …