Non-Convexities, Asymmetries, and Aggregate Investment Activity: Evidence for the UK (first version)

This paper documents asymmetries in the aggregate investment activity of UK industrial and commercial companies. It then investigates the ability of a model of aggregate activity based on heterogeneous actions under asymmetric and non-convex adjustment at the individual level to account for this feature. Aggregate activity is found to be consistent with non-convex adjustment at the individual level, but asymmetric policies contribute little to asymmetry in aggregate fluctuations. This suggests that while inaction and heterogeneity play an important part in determining the nature of fluctuations in aggregate investment activity, irreversibility of investment per se is not the cause of asymmetries in aggregate activity.