investment, even controlling for past investment and sales. We re-calibrate the Thomas (2002) model (that includes fixed costs of investing) so that it assigns a prominent role to extensive adjustment. The recalibrated model has very different properties than the standard RBC model for some shocks.

What is the long-run effect of dividend taxation on aggregate capital accumulation? To address this question, we build a dynamic general equilibrium model in which there is a continuum of firms subject to idiosyncratic productivity shocks. We show that at any point in time, a firm may lie in one...

What inflation rate should central banks target? Following the work of Bils and Klenow (2004), who were the first to document the large amount of heterogeneity in the frequency of price changes across different categories of goods and services in the United States, a growing literature has...