We examine a model of lumpy investment wherein establishments face persistent shocks to common and plant-specific productivity, and nonconvex adjustment costs lead them to pursue generalized (S,s) investment rules. We allow persistent heterogeneity in both capital and total factor productivity...

Inflation, Employment and Interest Rates in an Economy with Endogenous Market Segmentation Aubhik Khan, Federal Reserve Bank of Philadelphia Julia K. Thomas, University of Minnesota We examine a monetary economy where households incur fixed transactions costs when exchanging bonds and money and,...

We solve the first general equilibrium model of lumpy investment allowing a quantitative match with recent empirical evidence on establishment-level investment dynamics. In our model, establishments are subject to both persistent aggregate and persistent idiosyncratic shocks, and they face...

Using an equilibrium business cycle model, we search for agregate nonlinearities arising from the introduction of nonconvex capital adjustment costs. We find that, while such adjustment costs lead to nontrivial nonlinearities in aggregate investment demand, equilibrium investment is effectively...

We develop a model of costly technology adoption where the cost is irrecoverable and fixed. Households must decide when to switch from an existing technology to a new, more productive technology. Using a recursive approach, we show that there is a unique threshold level of wealth above which a...

We study a model of lumpy investment wherein establishments face persistent shocks to common and plant-specific productivity, and nonconvex adjustment costs lead them to pursue generalized (S, s) investment rules. We allow persistent heterogeneity in both capital and total factor productivity...

Does financial development lead to greater economic growth? Or does economic growth lead to more highly developed financial systems? In this article, Aubhik Khan presents some recent evidence that appears to support the first question: financial development may also have a significant impact on...

We develop an equilibrium business cycle model where producers of final goods pursue generalized (S,s) inventory policies with respect to intermediate goods due to nonconvex factor adjustment costs. When calibrated to reproduce the average inventory-to-sales ratio in postwar U.S. data, our model...