Scandinavian Working Papers in Economics
Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)
No 143: Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model Do They Suggest?
Mikael Carlsson and Stefan Laséen ()
Additional contact information
Mikael Carlsson: Department of Economics, Postal: Uppsala University, Box 513, SE-751 20 Uppsala, Sweden
Stefan Laséen: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Abstract: In this paper we study the capital adjustment process in Swedish manufacturing firms and relate the empirical findings to standard models of firm behavior in the presence of impediments to capital adjustments. We find that (i) an S,s model fits the data well in some, but not all, dimensions. (ii) A model with irreversible capital goes a long way in capturing the salient features of firm-level capital adjustment behavior. (iii) The partial adjustment model generally fails to explain capital adjustment patterns. (iv) The capital accumulation process is a highly volatile and non-persistent process on the firm-level. (v) Firms’ adjustment behavior is asymmetric in that they are more likely to tolerate excess capital than shortages of capital, and, finally, (vi) the estimated adjustment function implies that aggregate investment is relatively unresponsive to aggregate shocks in deep recessions as compared to normal times.
Keywords: Investment; Irreversibilities; Lumpiness; Manufacturing
43 pages, December 1, 2002
Full text files
wp_143.pdf
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