The Macroeconomics of Partial Irreversibility by Isaac Baley

Join us for this weeks Macroeconomics Research Seminar, Summer Term 2023.

Isaac Baley from Universitat Pompeu Fabra, will present this weeks Macroeconomics seminar.

Abstract

We investigate the macroeconomic effects of partially irreversible investment arising from a wedge between the buying and selling price of capital. We derive sufficient statistics that characterize the implications of irreversibility for three long-run macroeconomic outcomes: capital allocation, capital valuation, and capital fluctuations. Measuring these statistics with investment microdata, we find that irreversibility distorts capital allocation, lowers capital valuation, and increases the persistence of capital fluctuations. Corporate income tax cuts, by lowering the deductibility of capital losses due to the price wedge, effectively increase irreversibility and structurally change long-run capital behavior. 

This seminar will be held on campus in the Economics Common Room at 4pm on Tuesday 2 May. This event is open to all levels of study and is also open to the public. To register your place, please contact the seminar organisers.

This event is part of the Macroeconomics Research Seminar Series.