BPEA | 1995 No. 2

Plant-Level Adjustment and Aggregate Investment Dynamics

Eduardo M.R.A. Engel,
Eduardo M.R.A. Engel Universidad de Chile
John Haltiwanger, and
John Haltiwanger Professor of Economics - University of Maryland
Ricardo J. Caballero
Ricardo J. Caballero Massachusetts Institute of Technology
discussants: Michael Woodford and Robert E. Hall
Robert Hall Headshot
Robert E. Hall Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics - Stanford University

1995, No. 2

THE EMPIRICAL INVESTMENT literature is full of disappointments. From
time to time waves of new ideas challenge the aggregate investment
equation, but these challenges are rarely successful, and progress is, at
best, slow. There are serious theoretical obstacles, stemming mostly
from the richness of the cross-sectional and time-series scenarios faced
by actual investors, from the complexity of the investment technologies
available to them, and from the myriad incentive problems that these
economic agents face. There are at least as complex, and perhaps insurmountable,
data problems. Both right- and left-hand side variables
are seldom measuredp roperly.