Investment under Rational Inattention: Evidence from US Sectoral Data

Arbeitspapier

Macroeconomic and sector-specific shocks exert differential effects on investment in disaggregate sectoral data. The response to macroeconomic shocks is hump-shaped, just as in aggregate data. The effects of sectoral innovations decrease monotonically. A calibrated model of investment with convex capital adjustment costs and rational inattention explains these features of the data. The model matches the empirical responses of sectoral investment because learning about shocks generates additional investment demand over time, and more so after aggregate shocks with relatively higher persistence. The interaction of information frictions and physical adjustment costs is key to this result.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8436

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Business Fluctuations; Cycles ; Intertemporal Firm Choice: Investment, Capacity, and Financing ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Principal Components; Factor Models
• Subject: investment dynamics ; hump shape ; rational inattention ; adjustment costs

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Zorn, Peter
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223508
• Last update: 10.03.2025, 11:45 AM CET