This paper explores cyclical fluctuations in investment due to discrete changes in the plant's stock of capital. To do so, we focus on a machine replacement problem in which a producer decides whether to replace its entire existing stock of capital with new machinery and equipment. This decision...

This paper studies the interaction between capital reallocation and business cycles. Capital reallocation is pro-cyclical and leads to variations in measured aggregate productivity. Using a simulated method of moments approach, different sources of aggregate fluctuations are studied to assess...

This paper studies an economy in which producers must incur resource costs to replace depreciated machines. The process of costly replacement and depreciation creates endogenous fluctuations in productivity, employment and output of a single producer. We also explore the spillover effects of...