Is the typical specification of the Euler equation for investment employed in DSGE models consistent with aggregate macro data? Using state-of-the-art econometric methods that are robust to weak instruments and exploit information in possible structural changes, the answer is yes. Unfortunately,...

The Euler equation model for investment with adjustment costs and variable capital utilization is estimated using aggregate US post-war data with econometric methods that are robust to weak instruments and exploit information in possible structural changes. Various alternative identification...