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Fixed adjustment costs and aggregate fluctuations

Research output: Contribution to conferencePaper

Original languageEnglish
Number of pages50
Publication statusPublished - 23 Dec 2014
EventSociety for Economic Dynamics - University of Cyprus, Limassol, Cyprus
Duration: 22 Jun 201224 Dec 2012


ConferenceSociety for Economic Dynamics
Abbreviated titleSED
Internet address


This paper studies the analytics of a canonical model of lumpy microeconomic adjustment. We provide a novel characterization of the implied aggregate dynamics. In general, the distribution of firm outcomes follows a simple and intuitive law of motion that links aggregate outcomes to rates of adjustment. Analytical approximations reveal, however, that the aggregate dynamics are approximately invariant to a relevant range of adjustment costs. This neutrality is an aggregation result that emerges from a symmetry property in the distributional dynamics, independent of market equilibrium considerations. Quantitative illustrations conform these results for parameterizations used in the employment and price adjustment literatures

    Research areas

  • lumpy microeconomic adjustment, Ss model, cross-sectional dynamics, aggregate employment dynamics.


Society for Economic Dynamics


Limassol, Cyprus

Event: Conference

ID: 34801607