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).


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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.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/j.jmoneco.2011.08.001
ISSNs: 0304-3932 (print)
Organisations: Economics
ePrint ID: 203665
Date :
Date Event
May 2011Published
Date Deposited: 17 Nov 2011 16:28
Last Modified: 18 Apr 2017 01:15
Further Information:Google Scholar

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