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Plant-level nonconvex output adjustment and aggregate fluctuations

Šustek, Roman (2011) Plant-level nonconvex output adjustment and aggregate fluctuations Journal of Monetary Economics, 58, (4), pp. 400-414. (doi:10.1016/j.jmoneco.2011.08.001).

Record type: Article


In most manufacturing industries plant-level output is adjusted along three margins of capacity utilization: shiftwork, weekend work, and closing temporarily down. Due to the discrete and lumpy nature of these margins, only a fraction of plants adjust output in response to shocks. In a business cycle model calibrated to establishment-level observations, these nonconvexities make aggregate output less volatile than when plants can adjust smoothly. Further, the mass of adjusting plants is larger in downturns than in upturns, leading to counter-cyclical volatility of aggregate output and government policy being slightly more effective in recessions than in expansions.

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Published date: May 2011
Organisations: Economics


Local EPrints ID: 203665
ISSN: 0304-3932
PURE UUID: 7b69f484-a67b-48d2-814e-3057c6d86ff1

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Date deposited: 17 Nov 2011 16:28
Last modified: 18 Jul 2017 11:07

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Author: Roman Šustek

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