Firm‐level Investment Spikes and Aggregate Investment over the Great Recession
Bibliographic Data
| ID | 9726250 |
|---|---|
| Authors | Richard Disney (0000-0001-6438-6326, Institute for Fiscal Studies University College London and University of Sussex), Helen Miller (0000-0003-1440-0454, Institute for Fiscal Studies), Thomas Pope (0000-0003-0817-7452, Institute for Fiscal Studies) |
| Year | 2020 |
| Volume | 87 |
| Issue | 345 |
| Pages | 217-248 |
| Publication date | 2020-01-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Economica (JOURNAL) |
| Journal identifiers | ISSN: 0013-0427 • E-ISSN: 1468-0335 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/ecca.12301 |
| OpenAlex | W2786342507 |
| Language | EN |
| Citations received | 1 |
| References cited | 41 |
It is widely accepted that firm‐level investment is characterized by periods of low investment punctuated by ‘spikes’, but widely debated whether such lumpiness matters for aggregate investment. We provide new empirical evidence that variation in UK aggregate investment is driven by variation in the number of firms undertaking investment spikes; this pattern holds for all sectors and across the business cycle. We set out and estimate a tractable firm‐level model of the timing of investment spikes that incorporates the effect of specific macroeconomic factors and aggregates to match observed variation in aggregate investment. Using simulations, we establish that low demand growth was the dominant factor inhibiting UK firms’ investment spikes immediately following the Great Recession, while heightened uncertainty prolonged low investment and prevented a ‘v‐shaped’ economic recovery. We use the Great Recession as a source of exogenous variation with which to study heterogeneity in response to aggregate shocks. We find that the minority of firms operating with persistently high‐debt levels—and therefore with balance sheets more exposed to the costs of financial distress—were significantly less likely to undertake an investment spike following the recession
Aggregate (composite) · Business cycle · Debt · Economics · Great recession · Investment (military) · Labour economics · Macroeconomics · Monetary economics · Open-ended investment company · Production (economics) · Recession · Return on investment · Separately managed account · Variation (astronomy) · Capital Investment and Risk Analysis · Economic Growth and Productivity · Monetary Policy and Economic Impact
Investment under Uncertainty
The Econometric Analysis of Transition Data
Credit Spreads and Business Cycle Fluctuations
Uncertainty and Investment Dynamics
Testing Trade-Off and Pecking Order Predictions About Dividends and Debt
Some Tests of Specification for Panel Data
Zeros and Lumps in Investment
Is Lumpy Investment Relevant for the Business Cycle
Credit Cycles
Restructuring and Productivity Growth in UK Manufacturing
| Citations per year | 1 |
|---|---|
| Citation span | 2026 - 2026 (1) |
| Highly cited | No |